Edited version of private advice

Authorisation Number: 1052328614504

Date of advice: 21 November 2024

Ruling

Subject: Am I in business

Question 1

Were you carrying on a business of options trading?

Answer 1

Yes.

Based on the information provided, the Commissioner has agreed that you satisfied the indicators outlined in Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production? for the financial year ended 30 June 2023. The profit-making purpose of your activity and the prospect of profit from the activity, its significant commercial character, repetition and regularity, its planned, organised and carried on in a business-like manner along with its size, scale and permanency together indicate that you were carrying on a business of option trading.

Question 2

If you were carrying on a business of options trading are the losses subject to the non-commercial loss provisions?

Answer 2

Yes.

As it has been determined you are carrying on a business the losses are subject to non-commercial loss provisions, if you meet the income requirement and one of the four tests.

Question 3

If you are not in the business of options trading business was the taxpayer engaged in commercial transactions for the purposes of a profit-making undertaking or plan where losses incurred would be an allowable deduction under section 25-40 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer 3

Not applicable.

Question 4

Are the options and share trading programs and subscriptions deductible under sections 8-1, 25-40 or 40-880 of the ITAA 1997?

Answer 4

Yes.

As the programs and subscriptions were used to generate assessable income they are deductible under section 8-1 of the ITAA 1997.

This ruling applies for the following periods:

Year ended June 30 20XX

Year ended June 3020XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You started options trading in the 20XX-XX financial year. You have continued to trade in the 20XX-XX financial year on a reduced basis.

You chose to start options trading at the start of the 20XX-XX financial year as a way to generate income.

To complete your trading, you looked at several programs and software.

Within these programs you had access to a coach that would provide trading tips and assistance while trading. Via this program you received daily coaching and predetermined strategies. Within this program you would be connected via an online portal to the US trade market.

You opened an investment account at the start of the 20XX-XX financial year and deposited funds twice into the account. This money was sourced from your own savings.

During the 20XX-XX financial year there was a sizeable number of trades. At the end of the 20XX-XX financial year there were options carried over into the 20XX-XX financial year.

For most of the options you held and closed within a day or two. There were multiple occasions where you held options for a period ranging between weeks and months.

These trades had a realised short-term profit, however, the trades resulted in an overall a short-term realised loss.

Over the 20XX-XX financial year you have stated that you have engaged in trading most nights when the market was open. You also engaged in 1 to 2 hours per day on research.

Your trading strategies were predetermined by the coaching you were receiving via the day trading program/coaching you have purchased. Your involvement in these strategies was to identify the market trends, determine movement of sectors, what shares are tradeable and the appropriate type of trade.

To limit any potential loss the taxpayer used the risk management strategies in accordance with the analyst trade ideas.

You were provided an automated daily spreadsheet to log transactions and the annual statement that had record of all transactions.

In the 20XX-XX financial year you have continued to option trade however, you no longer trade daily due to the market performance and have changed your trading strategies.

In the 20XX-XX you have made significant less trades. At the end of the 20XX-XX financial year, you still held trades to carry over into the next year.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 102-5

Income Tax Assessment Act 1997 section 102-10

Income Tax Assessment Act 1997 section 15-15

Income Tax Assessment Act 1997 section 25-40

Income Tax Assessment Act 1997 section 40-880

Income Tax Assessment Act 1997 section 8-1