Issue
Are gold nuggets 'personal use assets' under subsection 108-20(2) of the Income Tax Assessment Act 1997 (ITAA 1997) if a taxpayer has collected them pursuing a hobby and not in the course of carrying on any business or profit making activity?
Decision
Yes. Gold nuggets are 'personal use assets' under subsection 108-20(2) of the ITAA 1997 if a taxpayer has collected them pursuing a hobby and not in the course of carrying on any business or profit making activity.
Facts
The taxpayer fossicked for gold nuggets as a hobby while camping and occasionally found some nuggets. The taxpayer held a fossicking licence.
This activity did not amount to any business or profit making activity being carried on by the taxpayer but was merely a pastime enjoyed by the taxpayer.
Reasons for Decision
A 'personal use asset' includes a CGT asset, except a collectable, that is used or kept mainly for your (or your associate's) personal use or enjoyment: paragraph 108-20(2)(a) of the ITAA 1997. Gold nuggets are a form of property and accordingly are CGT assets: section 108-5 of the ITAA 1997.
In Favaro v FC of T (1996) 34 ATR 1; 96 ATC 4975 the Federal Court held that Italian currency which was converted to Australian currency was not a 'personal use asset' under the equivalent provision of the Income Tax Assessment Act 1936 (ITAA 1936). The Court accepted the Commissioner's submission that 'the expression "personal use" is used in s 160B of the ITAA in contradistinction to use for business or profit making purposes' (Subsection 160B(1) of the ITAA 1936 was rewritten as subsection 108-20(2) of the ITAA 1997).
The word 'contradistinction' means distinction by contrast or opposition ( The Australian Oxford Dictionary , 1999, Oxford University Press, Melbourne). Therefore, an asset that is not used for business or profit making purposes is, by default, used or kept mainly for personal use and enjoyment. The two categories are mutually exclusive.
In this case, the taxpayer collected the gold nuggets pursuing a hobby and not in the course of carrying on any business or profit making activity. As such, it is considered the gold nuggets are used or kept mainly for the personal use and enjoyment of the taxpayer and are therefore personal use assets under paragraph 108-20(2)(a) of the ITAA 1997.