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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your private ruling

Authorisation Number: 1012558927423

Ruling

Subject: Business - share trading

Question

Are you carrying on a business of share trading?

Answer

Yes

This ruling applies for the following period

1 July 2013 to 30 June 2017

The scheme commences on

1 July 2013

Relevant facts and circumstances

You use a substantial borrowed capital base to invest in the share market.

You carry out your share trading activity from your home office.

You undertake your own research and analysis of the stock market.

You have strategies and plans in place.

You maintain records of your share trading activity.

You spend time on your share trading activities each week.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 44

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 Division 70

Reasons for decision

Generally, there are two possible ways share trading activities may be treated for income tax purposes.

1. Business Income

In this scenario you would be a share trader, your shares are trading stock, income from sales are included in your assessable income under section 6-5 of the ITAA 1997, and expenses incurred to acquire the shares are deductible under section 8-1 of the ITAA 1997. Other expenses incurred in the course of carrying on the business would also be deductible under relevant provisions of the Income Tax Assessment Act 1936 (ITAA 1936) or the ITAA 1997.

2. Investment income

In this scenario, you would be regarded as a share investor. Your shares are treated as CGT assets, any gains from the disposal of the shares are included in your assessable income as a capital gain (section 102-5 of the ITAA 1997) and any losses sustained from the disposals will be a capital loss (section 102-10 of the ITAA 1997).

Dividend income is assessable under section 44 of the ITAA 1936 irrespective of which of the above scenarios applies.

Carrying on a business of share trading

The question of whether a business is being carried on is a question of fact and degree and is determined on a year by year basis. If a taxpayer's activities do not amount to the carrying on of a business in one income year, that will not prevent them doing so in a later income year. Similarly, when the extent of an activity falls below what is required for that activity to be commercially viable, the activity may no longer constitute the carrying on of a business.

Taxation Ruling TR 97/11 (Income Tax: am I carrying on a business of primary production?) provides a guide to the indicators that the courts have held to be relevant as to whether or not a person is carrying on a business.

Having regard to the indicators contained in TR 97/11, you are considered to be carrying on a business of share trading (albeit on a part-time basis) because:

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