Private ruling: Non-commercial loss-am
Date of advice: 15 January 2026
Published: 2 March 2026
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise the discretion in paragraph 35-55(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your futures trading activity in your calculation of taxable income for the relevant financial years? | A1: No

Relevant facts and circumstances: You trade in futures contracts. You commenced trading futures contracts in the relevant financial years. You have engaged in this trading activity through both proprietary trading firms and traditional futures contract trading platforms. Your activity is currently small in scale and in a developmental phase. The proprietary trading firms you operate through allow you to qualify for access to the opportunity to trade with their funds on payment of a fee and completion of a learning and evaluation program based on a non-trading mirror of real time market movements in the futures contracts you are trading. To date you have used online training resources, such as those available on YouTube, the structured evaluation programs, or challenges, offered by the proprietary trading firms and the built-in guidance that comes with subscription to these programs, and other online and community resources to develop the relevant skills and knowledge required to undertake this activity. Your business plan indicates that you intend to maximise your profits using access to funds provided by the proprietary trading platforms and controlling your expenditure. You expect to make profits from this activity over the next 3 years. Your projected profits are based on a number of assumptions, including stabilised personal and medical circumstances, systems and strategies refined through the learning and evaluation programs you are completing through the proprietary trading platforms, and performance that matches industry benchmarks published by those platforms. The proprietary trading firms you have engaged with provide structured evaluation accounts with strict rules including: • daily loss limits • trading drawdowns • profit targets • minimum trading days • news restrictions Once qualified to undertake funded trading you can withdraw profits as allowed by the firms' payout cycles. You are trading up to a targeted maximum amount of futures contracts on your current proprietary trading firm account, and estimate your turnover in your trading through share trading platforms ranges between $XX to $XX a year. You have made losses on your activity in the relevant financial years. Your losses have been due to the expenses associated with your activity such as platform and learning and evaluation program fees and other training and technology costs. These expenses have been less than $XX in each of the relevant financial years, and your income has been less than $XX. You traded in live environments using proprietary trading firm funds for X days or more to generate that income. In your direct trading activity you have traded several indexed micro futures instruments, investing several hundred dollars of your money and making an overall loss of a bit over $X. This trading activity took place over one calendar month in the relevant period. You monitor your trading performance by reviewing trading logs from the dashboards of the proprietary platforms you are using. You use platform provided charts, calendars, session timing and liquidity levels to monitor trading opportunities. You also monitor your trading performance through your trading statements from the platforms you engage with. You manage your risks using basic standard measures. You estimate that you were engaged in this trading activity, on average, for 3 to 4 hours a day 5 days a week. You spend 60% of this time on training and 40% of this time is spent trading through evaluation accounts or trading through traditional futures trading platforms. You rely on your bank statements as records of your income and expenses from your trading activity as some platforms do not issue receipts. In the relevant financial years, you have had to take to take more that 10 days off because you were sick or caring for other family members. These circumstances were beyond your control and have limited the time you were able to engage in futures contract trading. You are in full time employment in another capacity and your other income in these financial years was less than $XX a year.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 35 | Income Tax Assessment Act 1997 subsection 35-5(2) | Income Tax Assessment Act 1997 subsection 35-55(1) | Income Tax Assessment Act 1997 paragraph 35-55(1)(a)

Reasons for decision: Summary: For the purposes of considering the discretion in subsection 35-55(1) of the ITAA 1997 it is a requirement that Division 35 applies. Subsection 35-5(2) of the ITAA 1997 specifies that Division 35 is not intended to apply to activities that do not amount to carrying on a business. | Detailed Reasoning - Are you carrying on a business activity?: The Commissioner's view on whether a taxpayer is carrying on a business is set out in Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production? TR 97/11 identifies the following indicators for consideration to determine whether a taxpayer is carrying on a business: • 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 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 in that line of business • whether the activity is planned, organised and carried on in a businesslike manner such that it is directed at 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 a sporting activity. In determining whether a taxpayer is carrying on a business, no one indicator will be decisive. The indicators must be considered in combination and as a whole. Whether a business is being carried on depends on the large or general impressions gained from looking at all the indicators and whether these indicators provide the operations with a commercial flavour. | Detailed Reasoning - Whether the activity has a significant commercial purpose or character: An activity can be considered to have significant commercial purpose or character if it has a business plan, a profit-making purpose, and can be shown to be carried on in a commercially viable manner. The business planning process itself includes knowledge of or research into the activity to be undertaken, capital requirements and how these might be met, costs, legal requirements, and the size and scale needed for commercial viability. While you have a profit-making purpose most of your activity in the relevant financial years has been of a preparatory nature. You have undertaken research into the activity, the capital requirements, and how these might be met but you have not undertaken the activity on a commercial scale or in a commercially viable manner. Your futures trading activity in these financial years has not been of significant commercial character. | Detailed Reasoning - Whether there is a purpose of profit as well as a prospect of profit from the activity: A business must have a purpose as well as a prospect of profit. This includes planning and activity that is directed towards making a profit and being able to demonstrate how that profit is to be made. Markets for trading derivative instruments, including futures contracts, are known to be volatile and trading in these markets carries a high level of risk. While you have a purpose of profit the payments you have received for this activity are not for significant amounts and you have made overall losses in the relevant financial years. The prospect of your making a profit at your current level of engagement with this activity is uncertain. | Detailed Reasoning - Whether there is repetition and regularity of the activity: Activity must be undertaken on a continuous and repetitive basis, as appropriate to the industry, for it to be considered a business. The time you have spent generating income through platform funded trading and the short period in which you were trading through a direct brokerage platform using your own funds are not evidence of the repetition or regularity that would be expected of a business in this industry. | Detailed Reasoning - 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: An activity can more readily be recognised as commercial if it is of same kind and carried on in a similar manner to other businesses in the same industry. While you have been learning to use standard market indicators, trading strategies, and risk management techniques the scale of the activity you have undertaken in the relevant financial years has been small and the instruments you are trading in are suitable for retail traders or those looking to commit minimal resources. Your investment in this trading activity has been minimal and the time you are committing to this activity on the days you are trading are less than those that would usually be expected in this industry. | Detailed Reasoning - Whether the activity is planned, organised, and carried on in a businesslike manner such that it is directed at making a profit: An activity can more readily be characterised as a business when it is carried on in a planned, organised, and businesslike manner such that it is directed at making a profit. The organisation of your activity could be characterised as casual and more suited to an that of an amateur hobbyist. On the evidence provided you are not systematically maintaining, managing, or monitoring records, including invoices or emailed receipts, so you can maximise your income and minimise your expenses, or meet the taxation obligations required for business activity. | Detailed Reasoning - The size, scale, and permanency of the activity: An activity would be expected to be of a size, scale, and permanency suitable to the industry it is operating in to be recognised as a business. Your activity is on a much smaller scale than would be expected from business in this industry and, while you intend to continue with this activity the limited time you have spent on live trading cannot be considered evidence of permanency. | Detailed Reasoning - Whether the activity is better described as a hobby, a form of recreation, or a sporting activity: The small scale of your activity, the amateur way it is being carried out, and the limited time spent trading in live environments would be consistent with the activity being conducted as a hobby, a form or recreation, or a sporting activity. You also have income from other employment that you use to fund your everyday expenses. You do, however, intend to make a profit from this activity and supplement your other income with any profits you do make from it. This being the case the activity would not better be considered a hobby, recreation, or sporting activity at this time. It may better be characterised as preparatory and prior to commencing business activity. | Detailed Reasoning - Conclusion: We have considered how the above indicators apply to your futures trading activity and in this case you cannot be considered to have been carrying on a business with this activity in the relevant financial years. As you have not been carrying on a business with this activity in these years the provisions of Division 35 of the ITAA 1997 will not apply.