Classic cars, boats, artwork and other leisure assets can increase significantly in value over time. However, the Capital Gains Tax (CGT) treatment when these assets are sold can vary considerably depending on how the asset is classified.
Classic Cars and CGT:
Under Australian tax law, a capital gain or loss made on a qualifying “car” is generally disregarded for CGT purposes. To qualify, the vehicle must be designed to:
- Carry less than one tonne; and
- Carry fewer than nine passengers.
This means a classic car meeting the definition can potentially be sold at a significant profit without triggering CGT. However, different rules may apply to vehicles such as vintage trucks, buses and certain commercial or racing vehicles.
Further, the exemption ought not be lost if the classic car has not been driven and just stored.
Where the classic car is used for business or for other income producing purposes then a portion of the sale may be subject to Income Tax.
CGT implications for Boats, Aircraft and Collectables:
Unlike qualifying cars, boats and aircraft are generally treated as personal use assets. Where their purchase price exceeds $10,000, a capital gain on sale may be taxable, while capital losses on these assets are generally disregarded.
Artwork, jewellery, antiques, rare coins and similar collectables also have separate CGT rules, where if acquired for more than $500, capital gains are taxable.
Before buying or selling a high-value leisure assets, please contact Waterford Accountants to understand the potential tax implications.