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Edited version of your written advice
Authorisation Number: 1012852161905
Date of advice: 31 July 2015
Ruling
Subject: Am I in business of share trading
Question
For the financial years ended 30 June 20YY and 20ZZ 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 20YY
Year ended 30 June 20ZZ
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You are employed full time.
You have undertaken a number of share trading courses.
During the 20XX-YYand 20YY-ZZ financial years you were investing in shares under two different investment strategies:
1. long term hold: mainly for dividend and speculative purposes, only taking long positions as an investor.
2. short to medium term hold: trading in both long and short positions
You account for the two different strategies separately.
You have developed a trading plan which you strictly follow.
You have provided summaries setting out all your trades during the 20XX-YYand 20YY-ZZ financial years
You consider yourself to be a share trader for the shares in the short to medium term hold strategy implemented.
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, including having regard to the number of trades undertaken and the length of time the shares were held, the overall impression gained is that you were in the business of share trading for the 20XX-YYand 20YY-ZZ financial years.
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 of the ITAA 1997.