Private ruling: Income tax - assessable income
Date of advice: 10 April 2026
Published: 29 June 2026
Ruling period: Year Ended 30 June 20XX | Year Ended 30 June 20XX | Year Ended 30 June 20XX
Date scheme commenced: July 20XX

Ruling: Q1: Do your activities in relation to futures trading activities constitute the carrying on of a business? | A1: Yes.

Relevant facts and circumstances: You developed an interest in trading and financial markets, and you commenced structured futures. You began trading to generate supplementary income, with the intention of eventually developing it into a professional income stream. You had no professional trading experience prior to commencing your activity. You undertook extensive self-education, including reading trading books, and your trading methodology is based on a xx framework. You have subscribed to several educational and market-analysis services. You have not received professional trading advice, and all trade decisions are made by you. You trade futures contracts on Country Y markets, and you occasionally trade options. You trade during the Country Y market session, and you spend approximately X hours per weekday and X hours each weekend reviewing trades, studying market material and refining strategies. Your trading activities consists exclusively of exchange-xx contracts. Your trading activity is primarily xx. Positions are generally held for a short period, typically ranging from several minutes to a few hours, and are rarely held overnight. Accordingly, the average holding period for positions is less than a day. You use paid subscriptions for execution and analysis. You consider that losses primarily arise due to market volatility and changing economic conditions. You maintain a written trading plan, including: • trading rules, • a risk-management framework, • capital-preservation rules, and • trading strategies. Your trading capital was sourced from personal savings and a compensation payment. You used no loans. You trade exchange-xx and occasionally options. You rely on a paid subscription to maintain complete quantitative trade records for your activity. Your loss-limitation controls include: • a daily loss cap, • predefined stop-losses, • maximum risk-per-trade limits, • position-size limits, • avoiding trading during major economic announcements, and • ceasing trading after emotional or rule-breaking trades. You are still actively trading, your performance for the current financial year is approximately flat, and you have adopted a more conservative, risk-managed approach. You have invested capital in your trading activities. You are employed full-time and this is your primary source of income. Based on the records from a subscript your results are as follows: • 20XX-XX financial year - loss, • 20XX-XX financial year - profit, and • 20XX-XX financial year - loss.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 Division 70 | Income Tax Assessment Act 1997 subsection 995-1(1)

Reasons for decision: Summary: Your futures trading activities constitute the carrying on of a business. | Detailed Reasoning - Detailed reasoning: Where a person trades in shares as a business, the associated income is assessable as business income under subsection 6-5(2) of the ITAA 1997 and the expenses would be deductible under section 8-1 of the ITAA 1997. However, where a person is not in business, the shares will be capital assets and any gains would be assessed under section 102-5 of the ITAA 1997 and any losses would be deductible under section 102-10 of the ITAA 1997. Section 995-1 of the ITAA 1997 defines a business to include any profession, trade, employment, vocation or calling but does not include occupation as an employee. This definition, however, simply states what activities may be included in a business. It does not provide any guidance for determining whether the nature, extent, and manner of undertaking those activities amount to the carrying on of a business. For determining whether an activity is in the carrying on of a business the facts of each case must be examined having regard to relevant indicators that have been established through case law. Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production (TR 97/11) lists these general indicators and although the ruling is in respect of primary production the general indicators can be applied to any industry. These general indicators 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 are repetition and regularity of the activity, • whether the activity is of the same kind and carried on in a similar manner to that of the ordinary trade, • whether the activity is organised in a businesslike manner, • the size or scale or permanency of the activity, and • whether the activity is better described as a hobby, a form of recreation or a sporting activity. In respect of share market trading, AAT Case 6297 (1990) 21 ATR 3747 ( AAT Case 6297) and Case X86 90 ATC 621 ( Case X86 ), listed the following indicators of carrying on a business: • the nature of the activities and whether they have the purpose of profit-making, • the complexity and magnitude of the undertaking, • an intention to engage in trade regularly, routinely, or systematically, • operating in a business-like manner and the degree of sophistication involved, • whether any profit or loss is regarded as arising from a discernible pattern of trading, and • the volume of the taxpayer's operation and the amount of capital employed by them, and more particularly in respect of share traders: • repetition and regularity in the buying and selling of shares, • turnover, • whether the taxpayer is operating to a plan, setting budgets and targets or keeping records, • maintenance of an office, • accounting for the share transactions on a gross receipts' basis, and • whether the taxpayer is engaged in another full-time occupation. Of these indicators, paragraph 16 of TR 97/11 states when considering whether a person is carrying on a business, all the indicators must be weighed up. However, in doing so, equal weighting may not be given to each indicator. Whether a business is carried on depends on the general impression gained and whether it has a commercial flavour or character. In most cases, the greatest weighting is given to the repetition and regularity of the activities followed by organisation in a business-like manner as a supportive indicator. Based on the factors of your situation, we have considered the following indicators: | Detailed Reasoning - Whether the activity has a significant commercial purpose or character: This indicator generally covers aspects of all the other indicators and broadly requires that a taxpayer be able to show that the activity is carried on for commercial reasons and in a commercially viable manner. A taxpayer needs to be able to show that the interaction between the size and scale of the activity, the repetition and regularity and the intention and prospect of profit are sufficient to conclude that the activity has a significant commercial purpose. In your case, there are several characteristics that support a commercial purpose. You have a stated profit objective, you maintain a documented trading plan, you apply defined risk-governance measures, and you demonstrated active trading operations. While there were some structural shortcomings, they are outweighed by the broader commercial indicators present. Your use of defined trading rules, risk-management settings, regular performance review and sustained periods of high-volume trading show that the activity was undertaken with a clear and deliberate commercial focus. On balance, the activity exhibits a meaningful commercial purpose. | Detailed Reasoning - Whether the taxpayer has more than an intention to engage in business: You demonstrated more than a mere intention to engage in trading activities. You opened and funded a trading account, undertook actual share and futures transactions, and committed time and resources to the activity. You also undertook self-education and subscribed to paid services to support and facilitate your trading. | Detailed Reasoning - Whether there is repetition and regularity of the activity: Repetition and regularity are important indicators in determining whether a trading activity amounts to a business. Over the relevant period you undertook a substantial volume of trading, particularly in the 20XX-XX and 20XX-XX financial years during which you executed a very high number of trades. Your activity in those years shows consistent engagement with the market. These features point towards a pattern of activity that is characteristic of a trading business. There was a reduction in trading activity in the 20XX-XX financial year and no explanation for this decrease was provided. While this is a limitation, the presence of a lower-activity period does not in itself negate the overall pattern of regular involvement. Although you carried out the activity alongside full-time employment, this does not, of itself, prevent a finding of repetition and regularity. On balance, while there was a decline in trading in one year the overall pattern of activity demonstrates repetition and regularity consistent with the carrying on of a trading business. | Detailed Reasoning - The size, scale, and permanency of the activity: In assessing size, scale and permanency, small-scale trading is more likely to be considered investing unless the taxpayer shows high repetition and continuous activity. In your case, the level of trading varied across the relevant years. You trading volume in the 20XX-XX and 20XX-XX financial years, indicated periods of substantial activity. However, trading dropped sharply in the 20XX-XX financial year with no clear explanation for the reduction. When viewed across the full timeframe, the activity shows continuity rather than isolated or occasional engagement. Although the trading was conducted alongside full-time employment and without a documented long-term business plan, the high trading volumes in two of the three years indicate that the activity had sufficient size, presence and operational permanency to be consistent with the carrying on of a trading business. | Detailed Reasoning - Whether the business is of the same kind that is being carried on in a similar manner to that of the ordinary trade in that line of business: Activities are more likely to be a business when they are run in a way that looks like how other traders operate. Your activity shows some features that align with ordinary trading practice. The following align with ordinary trading practice: • use of recognised platforms, • trading of exchange-traded Country Y index futures, • trading during the Country Y session, • presence of a written trading plan and stated risk rules, and • periods of high activity. While there are some structural differences from how established trading businesses may operate, the core features of your activity align with ordinary trading practice. When viewed collectively, these operational features support the conclusion that your activity shares key characteristics with businesses ordinarily carried on in this field. | Detailed Reasoning - Whether the activity is planned, organised, and carried out in a businesslike manner: Activities are more likely to amount to the carrying on of a business where they are carried out in a systematic and organised manner. This usually involves matters such as having some form of forward planning to take account of contingencies and market fluctuations, setting profit targets, budgets, maintaining operations on a consistent basis, retaining, and pursuing profitable activities, discontinuing unprofitable activities and keeping appropriate business records. In your case, the following business-like features are present: • you have a written trading plan outlining rules and risk settings, • you use recognised trading platforms, • you have defined some risk measures (daily loss cap, stop-loss rules, position sizing), and • you spend time reviewing trades and studying market material on a regular basis. Therefore, when viewed as a whole, the activity reflects a level of planning and organisation that aligns with the way trading business commonly operate notwithstanding the areas identified for improvement. | Detailed Reasoning - Whether the activity would be better described as a hobby, recreational or sporting activity: You began trading with the intention of making a profit and you carried out actual xx using recognised trading platforms. The activity involved real money, formal risk rules, and periods of high trading volume. Your trading was not carried out for personal enjoyment, recreation or leisure and there is nothing to suggest it was undertaken as a hobby or pastime. Your share transactions would not be better described as a hobby, recreation or a sporting activity. | Detailed Reasoning - Conclusion: After weighing all relevant factors, it is the Commissioner's view that you were carrying on a trading business in the relevant financial years. The activity showed a clear commercial purpose, substantial trading activity, defined risk-management practices and operational features consistent with ordinary trading businesses. Although some aspects of planning and record keeping were less developed, these do not outweigh the broader indicators of business conduct. Accordingly, your trading gains and losses are assessable on revenue account under section 6-5(2) of the ITAA 1997 and losses are deductible under section 8-1 of the ITAA 1997.