Capital Gains Tax on Classic Cars and Leisure Assets Australia

Written by: Melissa Cunliffe

Capital gains tax on classic cars and leisure assets in Australia is one of the most misunderstood areas of the tax system. From vintage Porsches and muscle cars to luxury boats, aircraft and fine art, many investors assume these passion assets are automatically exempt from CGT. The reality depends entirely on how the asset is classified under Australian tax law.

If you are buying, holding or planning to sell a high-value leisure asset, understanding the capital gains tax implications upfront can save significant cost and stress later.

When are classic cars exempt from capital gains tax in Australia?

Under section 118-5 of the Income Tax Assessment Act 1997, a capital gain or loss from a 'car' is disregarded.

For CGT purposes, a car is defined as a motor vehicle designed to:

• Carry less than one tonne

• Carry fewer than nine passengers

If a classic vehicle meets this definition, any capital gain is ignored — even if the vehicle was purchased as an investment, held in a family trust, rarely driven, or has significantly appreciated in value.

For example, if a family trust purchases a 1969 Porsche 911 for $200,000 and later sells it for $260,000, the $60,000 gain is disregarded for capital gains tax purposes — provided it meets the legal definition of a car.

When does CGT apply to a classic vehicle?

Capital gains tax on classic cars in Australia may apply where the vehicle does not meet the definition of a 'car'.

Examples include:

• Vintage trucks with a carrying capacity of one tonne or more

• Buses designed to carry nine or more passengers

• Certain commercial vehicles

• Some racing vehicles not designed as passenger road cars

In these cases, the vehicle may fall under the personal use asset rules or standard CGT investment asset rules. If the asset was held for more than 12 months by an individual or trust, the 50% CGT discount may apply.

Importantly, if vehicles are bought and sold regularly in a commercial manner, the ATO may treat the activity as a business. In that case, profits may be taxed as ordinary income rather than under capital gains tax rules.

Classic car enthusiasts gather to showcase vintage vehicles — a reminder that understanding how the ATO classifies leisure assets is essential before buying or selling.

How capital gains tax applies to boats and aircraft in Australia

Unlike cars, boats and aircraft are not exempt from capital gains tax in Australia.

They are generally treated as personal use assets. If the purchase price exceeds $10,000, any capital gain on sale is taxable. However, capital losses on personal use assets are disregarded.

For example, if a boat is purchased for $150,000 and later sold for $210,000, the $60,000 gain is subject to CGT. If held for more than 12 months, the CGT discount may reduce the taxable gain.

CGT rules for artwork, jewellery and other collectables

Collectables are specifically subject to capital gains tax rules in Australia.

Collectables include:

• Artwork

• Jewellery

• Antiques

• Rare coins

• Manuscripts and stamps

If acquired for more than $500, capital gains are taxable. Capital losses on collectables can only be offset against gains from other collectables.

What the ATO looks for with leisure assets

The ATO continues to focus on high-value leisure assets, particularly where they are held in family trusts or companies.

Common review areas include:

• Whether the asset genuinely qualifies for exemption

• Whether activities amount to carrying on a business

• Whether expenses are being incorrectly claimed

• Whether GST obligations arise

Common mistakes investors make with passion assets

• Assuming all vehicles are subject to CGT

• Assuming all leisure assets are exempt

• Failing to understand the $10,000 personal use asset threshold

• Forgetting collectable loss quarantine rules

• Not reviewing ownership structures before sale

Before you sell a high-value leisure asset

Capital gains tax on classic cars and leisure assets in Australia depends on precise legal definitions and the way the asset has been used and structured.

Before selling a classic vehicle, boat, aircraft or artwork, it is essential to confirm the tax position. The difference between exemption and taxation can be significant.

If you would like clarity around capital gains tax on classic cars and leisure assets in Australia, our team can help. We will review your structure, confirm whether CGT applies and ensure you move forward with confidence.

Book an appointment with us today and make sure your passion investment is structured correctly from day one.

---

Disclaimer   

This article does not constitute financial advice and is for general information only. It does not take into account any individual’s personal objectives, situation or needs, and is not intended as professional advice. Any similarity to an individual’s personal circumstances and the examples provided in this article is purely coincidental. Any person acting upon such information without receiving specific advice, does so entirely at their own risk.   

Authorisation under an Australian Financial Services Licence (AFSL) is not required in the provision of this article and the author plus Future Accounting Group Pty Ltd is not acting in its capacity as an Australian Financial Services Licence holder  

Liability limited by a scheme approved under professional standards legislation. 

---