Private ruling: Share trading
Date of advice: 26 July 2023
Published: 11 September 2023
Ruling period: Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021 | Year ending 30 June 2022 | Year ending 30 June 2023 | Year ending 30 June 2024
Date scheme commenced: 1 July 2018

Ruling: Q1: Are the proceeds from the sale of shares and the interest income earned included in your assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. In accordance with the share trading agreement (Agreement) between you and a related party the transactions in the share trading account and linked investment account are considered yours. Having regard to the relevant factors contained in Taxation Ruling TR 97/11 Income Tax: am I carrying on a business of primary production? and your circumstances you are considered to be carrying to be carrying on a share trading business. As such, the proceeds from the sale of shares and the interest income are included in your assessable income under section 6-5 of the ITAA 1997. | Q2: Is the dividend income included in your assessable income under section 44 of the Income Tax Assessment Act 1936 (ITAA 1936)? | A2: Yes. The shares held in the share trading account are considered to be yours. Therefore, the dividend income earned from these shares is included in your assessable income under section 44 of the ITAA 1936. | Q3: Are you entitled to a deduction for the cost of shares purchased in the share trading account and brokerage fees paid on the transactions in this account under section 8-1 of the ITAA 1997? | A3: Yes. As the shares are considered to be yours and you are carrying on a business of share trading the cost of the shares and brokerage fees are deductible under section 8-1 of the ITAA 1997.

Relevant facts and circumstances: You entered into a share trading agreement (Agreement) with a related party. You and the related party met with a private banker and opened an Account in the related party's name only. The related party authorised you to trade on their account. Under the terms of the Agreement it was agreed that: • the trading activity would be funded through: - a loan facility from the related party, and - funds provided by you. • the profits and losses from the trading activity are yours and you indemnify the related party for any action and omission relating to the operation of the loan facility and trading activity, including but not limited to, statutory reporting, government filings, stamp duties and any form of taxes. Your trade execution strategy includes a buy strategy of 'Trailing buy + price rise ceiling buy combo' and a sell strategy of 'Trailing sell + price drop floor sell combo'. To conduct the share trading activity you research, select, use pattern evaluation, and trade placements in accordance with the trade execution strategy. You source information about shares on stock news, economic news, tendencies, updates, undervalued stocks, trade execution strategies, and identify current trends in technical graph setups from sources such as Morningstar, Motley Fool and High Strike Trading. On average you spend XX hours per week on share trading activities including research, stock selection and setting trades. You use a laptop, internet, phone and your home office for your share trading activities. You maintain comprehensive records of your share trading activities including a loan tracking spreadsheet, deficit tracking spreadsheet and profit and loss statements. During the relevant period: • you made a significant number of buy and sell transactions • bought and sold shares regularly and held shares for short periods of time, and • utilised considerable capital in the share trading activity. Small amounts of interest and dividends were received from the share trading activity.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 44 | Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 8-1