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CAPITAL GAINS TAX ON PERSONAL USE ASSETS
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NEWSLETTER
CAPITAL GAINS TAX
ON
PERSONAL USE ASSETS
Chartered Accountants
Level 1
64 Castlereagh Street
Sydney NSW 2000
Telephone +612 9232 1588
Facsimile +612 9235 1211
www.goodmanandco.com.au
contact@goodmanandco.com.au
CAPITAL GAINS TAX
ON
PERSONAL USE ASSETS
Contents Page
Introduction 4
What are personal use assets? 5
Listed and non listed personal use assets 6
Rules for calculating gains and losses on personal use assets 7-8
Record keeping requirements 9
Registers Annexed
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be reproduced without express written approval from the principal of this firm. Unauthorised reproductions will constitute copyright
infringement.
Disclaimer
All material on this site is written for general information and is not intended to take the place of specific advice. No material should
be accepted as authoritative advice and any reader wishing to act upon the material contained in the newsletter should first contact
the firm for properly considered professional advice which will take into account specific situations. No responsibility is accepted for
any action taken by readers relying on the material contained on this site without first obtaining specific advice from this firm.
Accounting for the 21st Century
PERSONAL USE ASSETS
INTRODUCTION
Capital Gains Tax is a tax on the gain that arises on the disposal of assets where assets
are acquired by you on or after 19 September 1985. An example of assets subject to
Capital Gains Tax would be:
• Leases and interest in a partnership, etc.
• Shares in companies;
• Properties, Land and Buildings;
• Foreign currency, Convertible notes;
There are, however, assets exempt from Capital Gains Tax such as:
• Motor vehicles;
• Lottery and other winnings;
• Decorations for valour;
• Compensation for personal injuries..
Accounting for the 21st Century
PERSONAL USE ASSETS
INTRODUCTION Cont’d…
• Generally assets acquired by you on or before 19 September 1985 are exempt
from Capital Gains Tax (subject to some exceptions), however the issue for you
is that you must be able to establish clearly and preferably by documentary
evidence that you owned the asset on or before that date. This is one of the
reasons why you need investment registers and, most particularly, personal use
asset registers.
• The area is commonly overlooked by individuals is the area of personal use
assets.
• Failure to keep such a register will only benefit the Australian Taxation Office. If
you cannot satisfy the tax office as to whether an asset is pre or post capital
gains or, if post, the date the asset was acquired, then no relief will be available
to you in regard to tax on the sales of capital and personal use assets.
• In order to maintain complete confidentiality, on completion of the register we do
not recommend it be returned to our office.
• Should you have any doubts or queries in relation to your personal use assets
register, please do not hesitate to contact our offices, as we will be only too
happy to help you.
• At the end of the financial year do not forget to notify us of any sale of assets so their
tax consequences can be documented and, if necessary, included in your taxation
return.
Accounting for the 21st Century
PERSONAL USE ASSETS
WHAT ARE PERSONAL USE ASSETS?
In general terms, personal use assets are assets that can be broadly described as:
• Assets used or kept primarily for the personal use or enjoyment of the taxpayer and his
or her associates and does not include the taxpayer’s principal place of residence
• Certain debts
• Options and rights (see page 5).
Assets used or kept primarily for personal use or enjoyment:
The Treasurer has indicated that personal use assets kept primarily for personal use or
enjoyment would include such items as:
• Clothing such as furs
• Furniture
• Whitegoods
• Audio and video equipment such as a stereo,
video or television
• Sporting equipment such as skis
• Cameras
• Boats, Houseboats, Caravans not fixed to land
• Antiques, Jewellery (including wedding rings,
• engagement rings, watches, etc)
• Painting and artwork
• Horses
Accounting for the 21st Century
PERSONAL USE ASSETS
Debts
A debt would be a personal asset if the debt is owed to you in respect of a former personal use
asset sold by you to someone else. For example, the money owed to you on the sale of a boat
used by yourself for family use. A capital gain on the debt could arise if you assign the debt owed
to you to another person for a profit.
Options and rights
Options and rights in relation to personal use assets include options by yourself to acquire an
asset that would be a personal use asset.
For example, an option to purchase a racehorse from a friend who races the horse purely for
pleasure. A capital gain on the right could arise if you sold the right to purchase the racehorse
to another person for a profit.
Accounting for the 21st Century
PERSONAL USE ASSETS
LISTED AND NON LISTED PERSONAL USE ASSETS
Within the Legislation, there are two broad classes of personal use asset, they are:
• Listed personal use assets
• Non listed personal use assets
Listed personal use assets
A listed personal use asset has an acquisition cost of $500 or more ($100 for the period
20 September 1985 to 30 June 1995) and is:
• A print, etching, drawing, painting, sculpture or other similar work of art
• Jewellery
• A rare folio, manuscript or book
• A postage stamp or first day cover
• A coin or medallion
• An antique
• An interest in a debt owed in respect of or an option to acquire any of the above
Non listed personal use assets
Are all other assets used for personal use, purchased or sold for more than $10,000 ($5,000 for
the period 20 September 1985 to 30 June 1995). For example, houseboats, boats, guns, jet
skis, photographic equipment and horses acquired for a hobby.
Accounting for the 21st Century
PERSONAL USE ASSETS
RULES FOR CALCULATING GAINS AND LOSSES ON PERSONAL
USE ASSETS
When calculating the taxable capital gain in relation to personal use assets, there are special
rules which are essential. These are:
• If a capital gain arises upon the disposal of listed and non listed personal use asset, it is
considered to be an ordinary gain for Capital Gains Tax purposes
• If a capital loss arises upon the disposal of a listed personal use asset it may only be
offset against capital gains of other listed personal use assets either in the year of income
in which the loss occurred or in subsequent years of income
• If a capital loss arises upon the disposal of a non listed personal use asset the capital
loss will not be available to be offset against any capital gain
Examples of these rules are as follows:
Listed personal use assets:
1. If you purchased a dress ring for $5,000 on 1 July 1985 and subsequently sold it
for $10,000 the capital gain of $5,000 would not be assessable because the ring
was purchased prior to September 1985.
2. If you bought a print for $200 on 1 January 1993 and subsequently sold it for $500
on 1 November 1993 a capital gain of $300 would be assessable. The capital
gain is calculated as follows:
Proceeds on sale 500
Less Cost base of print (no adjustment for CPI because it was sold within 12 months) 200
NET TAXABLE GAIN $300
3. If you sold the abovementioned print on 1 November 1994, say,
the capital gain would be calculated as follows:
Proceeds on sale 500
Less Indexed cost base (original cost x CPI on sale date / CPI on acquisition date) 206
NET TAXABLE GAIN $294
Accounting for the 21st Century
PERSONAL USE ASSETS
4. If you sold a print for $100 on 1 December 1993, bought on 1 November 1989 for $200,
then the capital loss that arises can only be offset against another listed personal use
asset gain. For example, point 2 above. The capital loss allowable is calculated as
follows:
Proceeds on sale 100
Less Cost base of print 200
CAPITAL LOSS $100
Capital gain on sale of print (refer point 2) 300
Less Capital loss available from sale of print 100
NET CAPITAL GAIN $200
NB: Indexation does not apply on loss situations.
Non listed personal use assets
5. If you purchased a stereo for $6,000 on 1 December 1993 and sold the stereo on 10
November 1994 for $10,000, a capital gain of $4,000 would be assessable.
6. If a television was purchased for $1,000 and sold for $3,000 (prior to 1 July 1995), then
no gain on sale would be assessable as the cost and sale prices are both below $5,000.
For listed personal use assets where the indexed cost is less than $5,000, a capital gain
will only arise if the proceeds on sale are greater than $5,000. Capital gain will only
amount to the proceeds above $5,000.
7. If you purchased a boat on 1 December 1993 for $10,000 and sold it on 1 November
1994 for $6,000 then the loss would not be able to be offset against any capital gain that
may arise.
8. If you purchased a houseboat for $4,500 and sold it for $7,500, then the taxable gain is
$7,500 less the deemed cost of $5,000, equalling $2,500 which is fully taxable and not
indexed.
Accounting for the 21st Century
PERSONAL USE ASSETS
RECORD KEEPING REQUIREMENTS
The penalty for failing to maintain records ranges from $2,000 to $3,000. The onus of
proof in any dispute with the Commissioner relies on you being able to substantiate your
arguments with relevant documentation. Therefore, it is strongly advised that you
maintain a personal assets use register.
Record keeping must comprise and conform to:
• Records must be kept in English
• An adequate description of the asset. (In addition we recommend a photograph
be taken of jewellery, artwork, etc.)
• Date of acquisition
• Cost of acquisition plus disbursements, advice, etc.
• Date of sale
• Proceeds from sale less costs, commissions, etc.
To enable you to comply with these record keeping requirements, we include personal use asset
register forms in this newsletter. We suggest that you retain this bound newsletter as your
personal use asset register.
Accounting for the 21st Century
PERSONAL USE ASSETS
CAPITAL ASSETS AND INVESTMENT REGISTER
PERSONAL USE ASSETS
NAME .........................................................................................................................................
SALE
DESCRIPTION OF ASSETS DATE QUANTITY COST DATE PROCEEDS COMMENTS
ACQUIRED ACQUIRED $ DISPOSED $
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Accounting for the 21st Century
