Jewellery and art investment would be exempt from a CGT but a leading auctioneer warns against hasty investment

Jewellery will likely be exempt from any capital gains tax. Photo / Warren Buckland.

People thinking of investing in assets such as art and jewellery which would be exempt under any capital gains tax should do their homework and avoid rushing into it, a leading auctioneer says.

Last week, the Tax Working Group recommended a wide-ranging capital gains tax (CGT) which would be imposed on investment properties, businesses assets and farms.

Jewellery and art – as well as cars, boats and the family home – would all be exempt.

Auctioneer Dunbar Sloane said it was hard to know what impact the proposed CGT would have on art and Jewellery.

"Whether you have people diverting funds into jewellery, I guess you'll have a bit of that going on," he told the Herald.

"I think with things like art, it's such a specialised collecting area. Whether people will be brave enough to divert funds into art remains to be seen."

The Tax Working Group's report classified art and jewellery as "personal use assets".

It accepted that these types of assets were often purchased as investments expected to increase in value.

In fact, the report said that excluding these assets from a CGT may incentivise people to buy them over other more productive assets.

"However, at this time, the group proposes to exclude these assets for reasons of simplicity and compliance cost reduction.

"This concession should be monitored and, if necessary, revisited in the future, either entirely or by tax applying over a certain threshold."

Sloane said some artists had returned well but art was like fashion and went in and out of vogue, which affected value.

"You can't say, 'buying art you'll double your money'. There's no magic formula, you've got to do your homework. You've got to pick the up and comers."

He said it's not always the case that the art someone buys would go up in value and said the market needed to be observed for a few years.

"Seek advice rather than just plunging in, [or] you're going to get your fingers burnt."

Webb's director Ewen Mackenzie-Bowie said decorative arts, jewellery and wine could all serve as investments but as with most alternatives, there was risk.

"Certainly there is not much chance of a quick return, as one assumes one pays the market value at the time of purchase, and inflation is leisurely."

Although there would always be bargains that bring rapid returns, he said in general people need to recognise what they're buying, and be confident that it was, in fact, a bargain.

He gave the example of a painting, Salvator Mundi, attributed to Leonardo Da Vinci last year and sold by Christie's for US$450 million.

It was now alleged to be a "workshop Leonardo" painted by an assistant which would make it worth a fraction of the hammer price.

"The buyer, the Crown Prince of Saudi Arabia, can probably afford to take a loss, but the lesson is salutary," Mackenzie-Bowie said.

"The most important lesson to learn in any arts investment is to like and enjoy the piece."