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Edited version of private advice
Authorisation Number: 1052282111924
Date of advice: 25 July 2024
Ruling
Subject: CGT - sale of artwork
Question 1
Are the proceeds from the sale of the artwork assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
No.
Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.
In general, income is classified into three broad categories which include employment income, business income and profit on isolated transactions.
The artwork that you received from your family was a gift and there is no evidence to suggest that an employment arrangement existed, or that there was a business being carried on, or an isolated transaction occurred.
Therefore, the proceeds from the sale of the artwork are not assessable income.
Question 2
Will any capital gain or capital loss made on the sale of the artwork be disregarded?
Answer
Yes. The sale of the artwork is a disposal (CGT event A1) under section 104-10 of the ITAA 1997.
Subsection 104-10(5) of the ITAA 1997 provides that any capital gain or loss made on the disposal of an asset is disregarded if you acquired the asset before 20 September 1985. As you acquired the asset in 19XX any capital gain or loss is disregarded.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
In 19XX, your family gifted you some artwork.
The artwork was by an Australian artist and was completed in 19XX.
On XX/XX/20XX, the artwork was sold via auction.
Relevant legislative provisions
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 104-10