Private ruling: Collectables
Published: October 2013
Ruling period: Year ending 30 June 2014
Date scheme commenced: 01 July 2013

Ruling: Q1: Will subsection 118-10(1) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to the sale of some coins? | A1: Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. The taxpayer is planning to buy X coins. The taxpayer has never bought coins before, but decided that it will be a good personal collection. Depending on the price, each item will cost less than $500. The coins look exactly the same and are not part of any set(s). The taxpayer is not planning to sell the items anytime soon, hence, will be purely for personal use and collection. However, if something unexpected happens and the taxpayer needs cash, he/she might sell some of the items in the future. The taxpayer might also give some of them away as gifts on special occasions.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 108-15 | Income Tax Assessment Act 1997 subsection 104-10(1) | Income Tax Assessment Act 1997 subsection 108-10(2) | Income Tax Assessment Act 1997 subsection 118-10(1)

Reasons for decision: Summary: Subsection 118-10(1) of the Income Tax Assessment Act 1997 (ITAA 1997) will apply to the sale of some coins because they are considered to be collectables as defined under subsection 108-10(2) of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: Subsection 104-10(1) of the Income Tax Assessment Act 1997 (ITAA 1997) states that a capital gain tax (CGT) even A1 happens when a taxpayer disposes of a CGT asset. A taxpayer disposes of a CGT asset if a change of ownership occurs from the taxpayer to another entity. A capital gain or loss may be made if the capital proceeds from the disposal of a CGT asset are more or less than the cost base of the asset. However, subsection 118-10(1) of the ITAA 1997 states that a capital gain or capital loss you make from a collectable is disregarded if the first element of its cost base, or the first element of its cost if it is a depreciating asset, is $500 or less. Subsection 108-10(2) of the ITAA 1997 defines a collectable as: (a) artwork, jewellery, an antique, or a coin or medallion; or (b) a rare folio, manuscript or book; or (c) a postage stamp or first day cover; that is used or kept mainly for your (or your associate's) personal use or enjoyment. An exception to this rule is stated in section 108-15 of the ITAA 1997 where the collectable is part of a set. In that case, the set of collectables is taken to be a single collectable and each of the disposals is a disposal of part of that collectable. Therefore, if the set was acquired for more than $500, then CGT would apply, even if the items were sold individually at a later date. The taxpayer is planning to buy X coins for personal collection and each of them will cost less than $500. The coins look exactly the same as each other and are not part of any set. As stated in subsection 108-10(2), a coin is considered to be a collectable if it is used for personal use or enjoyment. Therefore, the coins are considered to be collectables and since each of them will cost less than $500 and are not part of a set, any capital gain or loss will be disregarded under subsection 118-10(1) of the ITAA 1997. The rulings in the register have been edited and may not contain all the factual details relevant to each decision. Do not use the register to predict ATO policy or decisions.