Capital gains tax does not just apply to “big ticket” items such as real estate, farms and shareholdings. It also applies to a special class of assets known as “personal use assets”, and in particular, those personal use assets known as “collectables”.
“Collectables” are specifically defined under the tax law to mean the following items that are “used or kept mainly for your personal use or enjoyment”:
- artwork, jewellery, an antique, or a coin or medallion; or
- a rare folio, manuscript or book; or
- a postage stamp or first day cover.
But for an asset to be a collectable, it must have cost more than $500. Otherwise, any collectable acquired for $500 or less is exempt from being a collectable (but subject to important rules to prevent abuse of this threshold test).
And the most important rule about a collectable is that if you make a capital loss on selling or disposing of a collectable, that capital loss can only be offset against capital gains from other collectables. It cannot be offset against the capital gain from, say, shares or real estate, and nor can it be offset against your other income. That is, the loss is “quarantined”.
Also note that jewellery you inherit from, say, your mother will retain its “character” as a collectable. So, bear this in mind also.
As for “personal use assets” per se (ie assets used for personal use or enjoyment which are not “collectables” – such as furniture, clothing, pianos etc) they are only subject to CGT if they cost more than $10,000. And importantly, you cannot claim a capital loss made on a personal use asset.
It should also be understood that a person who owns “collectables” can do so for the purpose of trading in them. In this case, the CGT rules take a backseat to the fact that the profit from such activities is assessable in the same way as if you were operating a business.
Finally, the recent 2026 Budget CGT reforms will apply to collectables as well. This will mean that you will need to determine their market value as at 30 June 2027 (or use the new apportionment method) for the purpose of applying the CGT discount up to any gain then. Thereafter the “indexation” approach will apply.
However, there are apparently plenty more changes in the pipeline – and we may yet see some form of exception for collectables.
In any event, it is still important to be aware of what assets are “collectables” and how the CGT rules generally apply to them.
So, if you find yourself dealing with such items – especially if they are valuable – it is necessary to get good tax advice on the matter. Make an appointment to see us at any time.
