Private ruling: Am I in business as a share trader?
Published: August 2012
Ruling period: 1 July 2007 to 30 June 2008 | 1 July 2008 to 30 June 2009
Date scheme commenced: 1 July 2007

Ruling: Q1: Were you carrying on a business of trading shares trading during the 200X income year? | A1: Yes. | Q2: Were you carrying on a business of trading share trading during the 200Y income year? | A2: Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You commenced trading in shares through a margin loan facility during the 200X income year. You intended to make a profit through the sale of shares held on a short term basis. Following is a summary of your share transactions for the 200X and 200Y income years: Income year 2008 2009 No. of purchases Less than 100 Less than 100 No. of sales Less than 100 Less than 100 Total value of purchases > than $ 2 million > than $ 6 million Avg value of purchase Approx. $250,000 Approx. $350,000 Total value of sales > than $ 2 million > than $ 6 million Avg value of sale Approx. $250,000 Approx. $350,000 Avg holding period (days) Approx. 50 Approx. 10 Dividends received Nil Nil

Relevant legislative provisions: Income Tax Assessment Act Section 6-5 | Income Tax Assessment Act Section 8-1.

Reasons for decision: Summary: Where an individual is carrying on a business of share trading your shares would be regarded as trading stock and any gains or losses would be included in your assessable income. Your income would be ordinary income and assessable under section 6-5 of the ITAA 1997, while your expenses would be deductible under section 8-1 of the ITAA 1997. Whether or not a person is carrying on a business is a question of fact. The determination of whether or not a business is being carried on is generally a process of weighing up all the relevant indicators. No one indictor determines whether or not a business is being carried on. Taxation Ruling TR 97/11 income Tax: am I carrying on a business of primary production (TR 97/11) lists the following indicators as relevant in determining if a business is being carried on: · Whether the activity has a significant commercial purpose or character, · Whether the taxpayer has more than an intention to engage in business, · Whether a taxpayer has a purpose of profit as well as a prospect of profit from the activity, · Whether there is repetition and regularity of the activity, · Whether the activity is of the same kind that is carried on in a similar manner to that of the ordinary trade in that line of business, · Whether the activity is planned, organised and carried out in a business like manner, · The size, scale and permanency of the activity, · Whether the activity is better describer as a hobby, a form of recreation or a sporting activity. | Detailed Reasoning - In your case;: Buying and selling shares is considered to be an activity that has a commercial purpose, and the size of your transactions are at a substantial level that would be considered to be commercial, You have more than an intention to engage in business, and engaged in your trading activities for more than a year, You have a profit intention, and intended to make profits through the sale of shares after holding them for a short period, You have repetition and regularity in that you have conducted both purchase and sale trades during the 200X and 200Y income year, Your trading activities were conducted over a time period longer than a year, indicating that your trading activities exhibit a level of permanency, Your trading activities would not be better described as a hobby, form of recreation or a sporting activity. The overall impression gained is that you are in the business of trading shares. Consequently, your income is assessable as ordinary income and is assessable under Section 6-5 of the ITAA 1997, while your deductions are allowable under Section 8-1 of the ITAA 1997.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.