For many wealthy families, some of their most valuable and most personal assets are not shares or buildings. They are a yacht moored in Sydney or Phuket, a share in a private aircraft, a collection of Chinese ink paintings or contemporary art, jade and jewellery, fine wine, or gold bars kept in a vault. These assets often carry strong emotional value and can be the hardest to divide when a family changes.
Families who have moved to Australia from Singapore, Malaysia, Hong Kong, Taiwan, Indonesia or mainland China often ask whether these assets should be held personally, in a family trust, in a company, or offshore. This article outlines the issues to consider. It is general information only, and the tax points in particular should be confirmed with a registered tax adviser.
Ownership options
- Personally. Simple and transparent, but the asset forms part of the owner’s estate and may be exposed to creditors and to claims on relationship breakdown.
- Family trust. Can help with succession and some asset protection, but family members’ private use of trust assets needs careful handling, and trust deeds must permit the investment.
- Company. Common for yachts and aircraft that are chartered or used in a business, but private use by shareholders and their relatives can create tax problems.
- Offshore entity. Sometimes used for assets kept overseas, but once family members are Australian residents, the offshore entity may raise residency and attribution issues, and the asset may still be subject to Australian rules when brought here.
Australian tax in general terms
- Collectables. Artworks, jewellery, antiques, coins, rare books and similar items are generally treated as “collectables” for capital gains tax purposes. Special rules apply: low-cost collectables may be disregarded, and capital losses on collectables can generally only be used against gains on collectables.
- Personal use assets. Items kept mainly for personal use or enjoyment, such as a pleasure boat, may be treated as personal use assets. Lower-value personal use assets may be disregarded for CGT, and losses on personal use assets are generally disregarded.
- Private use of company or trust assets. If a private company owns a yacht or holiday asset and shareholders or their relatives use it for free or below market value, rules that treat certain payments, loans and benefits from private companies as deemed dividends may apply. Where the users are employees, fringe benefits tax may arise. Trust assets used privately by beneficiaries also need to be considered.
- Business use. Where a yacht or aircraft is genuinely chartered or used in a business, some costs may be deductible, but the private and business use must be carefully separated and documented.
GST, luxury car tax and importing
Purchases and imports of luxury assets can attract indirect taxes. GST may apply to purchases in Australia and to imported goods, and luxury car tax may apply to certain higher-value vehicles. Bringing a yacht or aircraft into Australia can involve customs duty and import GST, and temporary import arrangements for visiting vessels have their own conditions and time limits. Precious metals of investment grade may be treated differently for GST from jewellery or collectable coins. These rules are technical, and advice should be obtained before purchase or import, not after arrival.
Physical gold and bullion
Gold is popular with many Asian families as a store of value. Points to consider include secure storage (at home, in a bank, or a private vault), insurance, keeping purchase invoices and assay certificates, and recording who owns which bars. When gold is sold, a capital gain may arise, and dealers and financial institutions may ask for identification and evidence of the source of funds. Undocumented gold can create difficulties for executors and in family law proceedings.
Registration, title and insurance
- Yachts and boats may be registered on a national ship register or a state recreational register, and the registered owner should match the intended legal owner.
- Aircraft are registered with the aviation regulator, and ownership, operation and maintenance responsibilities need to be clear, particularly for shared ownership.
- Art should be supported by provenance records, purchase documents, certificates of authenticity and condition reports. Title disputes and authenticity problems are much harder to resolve without them.
- Insurance policies should name the correct owner and reflect current valuations.
Estate planning
Luxury assets raise particular succession questions:
- Who inherits each item, and is it fair to give one child a painting while another receives cash?
- How will items be valued at death, and who pays for storage, insurance and maintenance in the meantime?
- Should a collection be kept together, for example in a trust or company, rather than split among heirs?
- Are there letters of wishes explaining the family’s intentions for heirlooms, such as a grandmother’s jade or a family calligraphy collection?
- Where assets are overseas, does the family need Wills or other documents in that country as well?
Family law and creditor exposure
Holding an asset in a trust or company does not automatically protect it in a family law property settlement. Australian courts can look at the realities of control and use. Similarly, assets held personally by someone in business or a professional role may be exposed to creditors. The structure should be chosen with these risks in mind, not only tax.
AML and source of funds
Dealers, auction houses, yacht brokers, banks and lawyers increasingly ask where the money came from. Families should be prepared to show the source of wealth and funds, particularly for cash or cross-border payments. Good records also make later sales and estate administration smoother.
Composite example: a Taiwanese family in Brisbane
This is a composite hypothetical drawn from common situations. Names and details are invented.
Mr and Mrs Lin, originally from Taichung, live in Brisbane. They own a collection of Chinese paintings bought over thirty years, a motor yacht owned by their private company, and gold bars kept in a safe at home. Their three children live in Brisbane, Taipei and Singapore.
A review identifies that the children use the yacht on weekends without paying, which may create tax issues for the company. Several paintings have no purchase records, and the gold has no invoices. The family arranges valuations and an inventory, adopts a written arrangement for private use of the yacht with tax advice, moves the gold to an insured vault with records of ownership, and updates their Wills with a letter of wishes, keeping the painting collection together in a trust for the grandchildren.
Frequently asked questions
Is art taxed when I sell it in Australia?
Generally, a capital gain on selling artwork may be subject to capital gains tax, with special rules for collectables. Low-cost items and losses are treated differently. Records of cost and valuation are important.
Can our family company own the yacht and the family use it?
It can own it, but private use by shareholders or their relatives may create deemed dividend or fringe benefits issues. Get tax advice before the purchase so that use is properly structured and documented.
How do I leave a collection to my children without it being broken up?
Options include leaving it to a testamentary trust or a company with clear rules, giving one child the collection with an equalising gift to others, or a letter of wishes. The right approach depends on the family and the assets.
How Chua Tan Associates can help
Chua Tan Associates advises families across Australia on holding and passing on significant personal assets, including ownership structures, trust and company documents, Wills and testamentary trusts, letters of wishes, and family law and estate issues. We are lawyers, and we work with registered tax advisers, valuers and overseas lawyers so that tax, title and cross-border issues are considered together. We advise in English, Mandarin and Cantonese.
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Chua Tan Associates acts for families, executors, trustees and their professional advisers in estate planning, estate administration and estate disputes in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal or tax advice.
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