Australia’s gold industry is a glittering cornerstone of the economy, contributing a staggering $23 billion in 2021.
Australia’s gold industry contributes billions to the economy, making gold a popular asset to buy, hold, and sell.
But while selling jewellery may offer a quick way to access funds, it’s important to navigate the associated taxes, including Capital Gains Tax (CGT) and Goods and Services Tax (GST), to avoid unexpected liabilities.
This blog breaks down the tax rules around selling jewellery, giving you the clarity needed to make informed decisions.
The Gold Market And Jewellery Sales: Key Insights
Australia’s rich gold resources make it one of the largest contributors to the global gold market, with billions generated annually.
Many people choose to sell jewellery for various reasons, including profit, necessity, or clearing out unwanted items.
But before selling, understanding factors like market timing, trustworthy buyers, and tax requirements is critical.
Here are a few key points to consider before selling jewellery:
| Consideration | Explanation |
|---|---|
| Market Timing | Monitoring gold market rates can maximise your returns on sale. |
| Trustworthy Buyers | Work only with licensed buyers registered by the Australian government. |
| Insurance & Fees | Be aware of any insurance or administrative fees that may apply. |
| Know Your Gold | The purity and karat level of gold impact its value and the sale price. |
Taxation On Jewellery Sales In Australia
In Australia, selling jewellery can trigger tax obligations, particularly when profits are involved.
Here’s what you need to know about how the tax system handles these transactions:
- Profit-Driven Taxation: Tax only applies to the profit made from the sale of jewellery. If you sell a piece of jewellery for more than you initially paid for it, you may need to pay tax on the difference.
- Holding Duration and Tax Rates: The length of time you’ve held onto the jewellery impacts the tax treatment. Jewellery held for over a year can qualify for a CGT discount of up to 50%, which effectively reduces the tax owed on the profits made from the sale.
In Australia, selling jewellery may incur tax liability, especially for income generating transactions.
The following is how the taxation system considers and regulates the certain transactions:
- Profit-Centric Taxation: Tax is applicable only on profit upon selling of the jewellery. If you have purchased some ring and after a few months sell it for a higher price, you will be taxed upon the difference.
- Holding Period and Its Effects on Taxation: The way the tax treatment is applicable also depends on the time the jewellery has been retained. More than a year norm has its CGT compulsory exemption provision at 50 for any jewellery thus sold.
Capital Gains Tax (CGT) On Jewellery Sales
The primary tax to think about when a person is selling any type of jewellery in Australia is the Capital Gains Tax (CGT). In sales meaning the use of jewellery, extra unique tax is being charged on the profit gained after selling an asset – in this case gold, silver, or other precious metals deposited in a bank for gains.
Taxable gains and losses in relation to making gains from selling jewellery occur, and a tax rate is applied to the taxable gain depending on the time it took to hold the jewellery before selling.
- CGT Rate: The general rate of capital gains tax charged on disposal of gold jewellery is 28 %.
- Discount on Long-Term Holdings: Any jewellery that has been held for more than one year will be granted a half of CGT. This implies that only half of the profit made will be taxed.
Let’s look at an example:
| Holding Period | Purchase Price | Sale Price | Capital Gain | Taxable Amount After Discount |
|---|---|---|---|---|
| Less than 12 months | $5,000 | $7,500 | $2,500 | $2,500 |
| More than 12 months | $5,000 | $7500 | $2,500 | $1,250 |
GST And Jewellery Sales
The Goods and Services Tax (GST) applies differently to various gold products. Investment-grade gold, defined as gold with a purity of at least 99.5% (bars) or 99.9% (coins), is GST-free.
However, jewellery doesn’t typically meet these purity requirements and, therefore, is subject to GST.
- Investment-Grade Gold: Gold bullion and coins that meet the purity standards are exempt from GST, making them more tax-efficient for investors.
- Jewellery and Non-Investment Gold: Jewellery and items that don’t qualify as investment-grade are typically subject to GST, affecting the net return on their sale.
Reporting Jewellery Sales To The ATO
The Australian Taxation Office (ATO) stipulates that individuals engaging in the business of selling gold jewellery need to incorporate such income in their annual tax returns. Compliance means having proper records to help in such calculations on gains or losses.
Here’s how to report:
- Report Capital Gains and Losses: Report any gain or loss made from the sale of jewellery in the income tax return. Further, where you have other capital gains during that year, able to make up these losses against any such gains.
- Hobby vs. Investment: If collecting gold or prospecting for gold is merely a pastime, leisure activity, it is likely that one will not need to declare anything earned unless it is turned into a business.
- Gold Gifts: No reportable income is generated by gold jewellery benefactors that recipients incur if it is only disposed of as a personal effect and not with the intention of making gains.
Ready For Expert Guidance On Your Jewellery Sales?
If you’re looking to make informed decisions about selling jewellery and handling tax implications confidently, Leading Tax Experts is here to help. Our team of experienced tax accountants in Melbourne can provide you with tailored advice on capital gains, reporting requirements, and tax-saving strategies.
Let us guide you through the complexities so you can maximise your returns. Reach out to us today for a consultation and ensure your jewellery sales are fully tax-compliant!
