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Edited version of your written advice
Authorisation Number: 1051218474495
Date of Advice: 3 May 2017
Ruling
Subject: Non-commercial losses and the assessable income test
Question 1
Are dividends received from shares that are held for the purposes of carrying on a business of share trading included as assessable income of a business for the purposes of Division 35 of the Income tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2016
The scheme commences on:
1 July 2015
Relevant facts and circumstances
You conduct a business of share trading which commenced in 2009.
Your sole propose is to derive revenue gains from your trading activity.
You received dividend income from shares as part of your trading activity where the holding period of the shares was satisfied.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 35-30.
Reasons for decision
Summary
Under section 35-30 of the ITAA 1997 the dividend income can be included as assessable income from the business activity.
Detailed reasoning
For a person who carries out business activities for the purpose of earning revenue gains from the buying and selling of shares, the receipts from the sale of shares constitute assessable income, the purchased shares would be regarded as trading stock, the costs incurred in buying or selling shares are an allowable deduction in the year in which they are incurred and dividends and other similar receipts are included as assessable income. Any losses will be deductible as a business loss, subject to Division 35 of the ITAA 1997.
Accordingly where shares are held to derive revenue gains it follows that any dividends received, where the holding period of the shares are satisfied, are receipts received as an ordinary incident of your business activity and as such, are assessable income in relation to your buying and selling shares activity.
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