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Edited version of your private ruling
Authorisation Number: 1012576897620
Ruling
Subject: Share trading and share investing
Question
For the financial years ending 30 June 2009 and 2010 were you considered to be carrying on a business of share trading?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2009
Year ended 30 June 2010
The scheme commences on:
1 July 2008
Relevant facts and circumstances
You are employed in an industry unrelated to the finance sector.
During the 2009 and 2010 financial years you opened trading accounts with a foreign stock brokering company.
You used these accounts investing in equities and options.
During this period you settled a large number of trades.
On average you traded once per business day.
You considered yourself to be a share investor during this period.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 8-1
Reasons for decision
Taxation Ruling TR 97/11 provides a guide to indicators that the courts have held to be relevant as to whether or not a person is carrying on a business. In the Commissioner's view, the factors that are considered important in determining the question of business activity are:
· whether the activity has a significant commercial purpose or character
· whether the taxpayer has more than just an intention to engage in business
· whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity
· whether there is regularity and repetition of the activity
· whether the activity is of the same kind and carried on in a similar manner to that of ordinary trade in that line of business
· whether the activity is planned, organised and carried on in a businesslike manner such that it is described as making a profit
· the size, scale and permanency of the activity, and
· whether the activity is better described as a hobby, a form of recreation or sporting activity.
Whether a business is being carried on depends on the large or general impression gained (Martin v. Federal Commissioner of Taxation (1953) 90 CLR 470; (1953) 10 ATD 226; (1953) 5 AITR 548) from looking at all the indicators of carrying on a business, and no one indicator will be decisive (Evans v. FC of T 89 ATC 4540; (1989) 20 ATR 922).
In your circumstances, the overall impression gained is that you were in the business of share trading.
Your income from your share trading business is assessable as ordinary income under section 6-5 of the ITAA 1997, while your deductions are allowable under section 8-1.
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