The recent debate surrounding Capital Gains Tax has triggered countless conversations across boardrooms, family offices and investment committees across Australia. Why not in the garage?
Written by Lex Pedersen, CEO of CHROME TEMPLE
The recent debate surrounding Capital Gains Tax has triggered countless conversations across boardrooms, family offices and investment committees across Australia. Why not in the garage?
For many investors, the focus has naturally centred on tax rates, structures and preserving future gains. It is an understandable response. When governments begin discussing changes to the taxation landscape, investors pay attention.
Before asking how an asset will be taxed, perhaps we should ask whether it is worth owning in the first place.
As Portfolio Manager of the Mach 1 Fund, I spend a great deal of time thinking about capital allocation. Over the years, I have observed that the most successful investors rarely create extraordinary outcomes through tax structures alone. Tax efficiency can improve a result, but exceptional asset selection is usually what creates it.
The current CGT discussion has nevertheless highlighted something interesting. Many sophisticated investors have spent decades understanding the taxation treatment of shares, property and private businesses, yet comparatively little time understanding the characteristics of collectible assets held in a personal capacity.
That may become increasingly relevant, particularly in our industry here at CHROME TEMPLE.
While every individual's circumstances are different and professional advice should always be obtained, there is no question that the recent debate has caused many investors to revisit how they structure their wealth, where they deploy capital and which assets they choose to own personally.
In that context and form my experience, collector vehicles remain one of the most overlooked asset classes in Australia, and in my opinion they are more attractive than ever now for several structural reasons.
For centuries, collectors have allocated capital towards scarce and culturally significant assets. Art collectors have done it. Wine collectors have done it. Collectors of rare books, manuscripts, jewellery and watches have done it. They understood that truly exceptional assets possess characteristics that extend beyond financial markets and economic cycles, even tax strategies.
The only difference is that our art happens to have wheels.
At CHROME TEMPLE, we have always believed that the world's greatest collector vehicles deserve to be viewed through the same lens as fine art and other important collectibles. Their value is rarely determined by utility. It is determined by scarcity, provenance, originality, cultural significance and desirability, akin to the ‘contemporary art boom’ we have observed since the 1970’s through today.
Those are the same characteristics that have driven value creation in collectible markets for generations.
What continues to surprise me is how often automotive art remains absent from conversations about sophisticated capital allocation. Investors are comfortable discussing paintings, sculptures and rare watches as collectible assets, yet many still struggle to view significant collector vehicles through the same lens, even when the highest levels of private wealth globally are participating in the space. Generations of automotive depreciation create habits that die hard.
The underlying principles, however, are indistinguishable.
The most desirable assets are scarce. They cannot simply be manufactured into existence. Their relevance survives economic cycles, historical data demonstrates they are a valuable hedging instrument. Their supply remains finite, diminishing in fact. As time passes, the number of exceptional examples often decreases while global demand continues to increase.
The challenge is that not all assets within a category are created equal.
This is where many collectors make expensive mistakes.
The difference between an average acquisition and an exceptional acquisition is rarely visible on the surface. Two cars of the exact same year, make and model can produce vastly different returns, and that complexity only multiplies when selecting across different eras and marques entirely. All to say, specifics matter. Provenance matters. Ownership history matters. Originality matters. Documentation matters. Market positioning matters. Understanding why one asset is desirable and another is merely available often determines the outcome years later.
This is why I believe the greatest challenge in automotive art is rarely market direction.
It is asset selection.
The wrong asset purchased cheaply is often more expensive than the right asset purchased well. Conversely, the highest-quality examples of the most desirable assets have historically been where the greatest wealth creation has occurred across almost every collectible category.
That philosophy sits at the heart of everything we do at CHROME TEMPLE.
We do not simply source vehicles. We help investors and clients build collections. There is a profound difference between the two.
Anyone can buy a car.
Building a meaningful collection requires a thesis. It requires research. It requires access. It requires patience. It requires discipline. Most importantly, it requires an understanding that ownership itself is not the objective. Ownership of the right assets is. The emotional and financial ROI ensues.
Whether Australia's CGT settings ultimately change or remain exactly as they are today is almost beside the point. Sure, it likely makes an already attractive asset class more attractive, but the opportunity remains regardless.
But, the conversation has encouraged investors to revisit where they allocate capital and which assets they choose to own. In our view, that is a worthwhile exercise.
As investors reassess their options in an evolving taxation environment, perhaps it is time more of them considered automotive art as part of that conversation. Because history suggests that wealth is rarely created by chasing tax outcomes alone. More often, it is created by identifying scarce, desirable and culturally important assets before the broader market fully recognises their significance.
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CHROME TEMPLE Investments Pty Ltd ACN 640 888 026 is a corporate authorised representative (number 001284056) of SILC Fiduciary Solutions Pty Ltd ACN 638 984 602 (AFS license number 522145), who is limited to general advice and deal by arranging services to wholesale clients relating to the Mach 1 Fund only. Investment in the Mach 1 Fund is only available to wholesale clients. Prospective investors should carefully review the Mach 1 Fund’s information memorandum (IM) in full and seek professional advice prior to making any investment decision.
This is general information only and doesn’t take into account your personal objectives, financial situation, or needs. Any one thinking about making a vehicle investment should carefully review their options and seek professional advice prior to making any investment decision or vehicle purchase. No reliance may be placed on this article for any purpose. Information in this article has been prepared without taking into account the objectives, circumstances, financial situation or needs of any person, and may differ to information obtained elsewhere.
Past performance is not a reliable indicator of future performance and the expected returns of the Fund or the asset class may not occur as expected or at all. An investor’s balance in the Fund or asset class may decrease as well as increase in value. Target returns are not guaranteed and total returns may be above or below the target range.
This article reflects the author's opinions on a particular subject matter. The views expressed do not necessarily reflect the performance of the Mach 1 Fund (the “Fund”) nor reflect the opinions of the Fund’s Trustee (Specialised Investment and Lending Corporation Ltd) or their affiliates.
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