Capital Gains: Personal use asset - floor tiles

Are unused marble floor tiles 'personal use assets' as defined in subsection 108-20(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Yes. The taxpayer's unused marble floor tiles are personal use assets as defined in subsection 108-20(2) of the ITAA 1997, as they were kept mainly for the taxpayer's personal use and not for any business or profit making purpose.

The taxpayer purchased a large number of marble floor tiles at an auction. The tiles were purchased for use in a property that the taxpayer owned and resided in. The taxpayer lived in the property for a number of years before leaving it vacant. The tiles were stored at the property during that time.

None of the tiles were actually used to tile the taxpayer's property. They were eventually sold to a number of different purchasers during the 2000 income year, some 7 years after the taxpayer acquired them.

Paragraph 108-20(2)(a) of the ITAA 1997 states that a personal use asset is 'a *CGT asset (except a *collectable) that is used or kept mainly for your (or your *associate's) personal use or enjoyment'.

In Favaro v. FC of T (1996) 34 ATR 1; 96 ATC 4975 Branson J held that Italian currency which was converted to Australian currency was not a 'personal use asset' as defined in subsection 160B(1) of the Income Tax Assessment Act 1936 . In making this decision Branson J accepted the Commissioner's argument 'that the expression "personal use" is used in s 160B of the ITAA 1936 in contradistinction to use for business or profit making purposes'.

The tiles were never 'used' for any purpose. However the definition also has regard to the purpose for which an asset is kept. At the time of purchase the taxpayer intended to use the tiles to tile the floor of a property he owned and resided in. After the taxpayer decided not to use the tiles in the property the tiles were held pending a decision as to their use.

The Macquarie Dictionary, 2001 , rev. 3rd edn, The Macquarie Library Pty Ltd, NSW defines 'mainly' as 'chiefly; principally; for the most part'.

The tiles were personal use assets when they were acquired and while being held pending a personal decision as to their use. Consequently, the tiles are considered to be personal use assets as they were kept 'mainly' for the taxpayer's personal use and enjoyment.

Subsection 108-20(3) of the ITAA 1997 provides that 'a personal use asset does not include land, a stratum unit or a building or structure that is taken to be a separate CGT asset because of Subdivision 108-D.'

The fact that the tiles would not be personal use assets had they actually been used for the purpose for which they were acquired because of that provision is not relevant. (Note: * an asterisked term is defined in the Dictionary starting at section 995-1 of the ITAA 1997)