Edited version of private advice

Authorisation Number: 1051874158076

Date of advice: 3 September 2021

Ruling

Subject: Carrying on a business

Question 1

Was the loss made through the activity on revenue account, but not from carrying on a business?

Answer

Yes.

We do not consider that your activities amount to the carrying on of a business in line with TR 97/11.We consider your activities are similar to entering into contracts for differences in that you took risks on movements in the price of an underlying asset without ownership of the underlying asset. Accordingly. as your activities were undertaken with a view to making a profit, your gains from trading are assessable under section 15-15 of the Income Tax Assessment Act 1997 (ITAA 1997) and losses are deductible under section 25-40 of the ITAA 1997.

Question 2

If the answer to question 1 is no, is the loss as a capital loss?

Answer

Not applicable.

Question 3

If the answer to question 1 is no, was the loss caused from carrying on a business?

Answer

Not applicable

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You opened an online brokerage account with the Broker. You contributed a total of $X.

You chose to use the Broker as it was a well known broker that had a reputation for competitive CFD and options trading at low commissions.

Your total activity lasted approximately X months for the total income year and the activity resulted in a total net loss of $X.

The majority of the loss related to writing options over futures based on the price of an underlying asset.

Your spouse assisted you with the activities but neither you or your spouse have relevant formal training. Your spouse has furthered their education by reading material on the Broker's website, along with reading over 12 different trading education textbooks and biographies.

The sources of technical materials and expert advice that you received and used in relation to your share activities is in most cases generally available to most persons involved in similar activities.

You relied on your spouse to complete the trades however you regularly checked your profit and contributed your opinion in attempt to gain maximum profit.

You do not have a formal business plan in relation to your share activities however your spouse did have predetermined trading rules and criteria in an attempt to generate profit.

Your spouse modelled out a best and worst case scenario for every trade, which exposed you to a risk of less than 10% of the cash in the trading account.

Your purpose and intention was to make a profit. You attempted to record lessons from loss transactions to improve the likelihood of generating a profit.

The size and scale of the activity is small, however, the amount traded had the potential for gains of approximately $X.

You regularly and repetitively monitored the share trading for approximately X months before the loss occurred.

You watch the market and accessed your accounts on a regular basis, making trades every few days. You did not stick to one company/brand and varied who you traded with through the Broker's website.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 15-15

Income Tax Assessment Act 1997 Section 25-40