Newsletter
October 2013 Newsletter
A share investor, not a share trader
The AAT has held that an individual was a share investor, and not a share trader as claimed, during the relevant years. The individual was a full-time council employee and claimed that he had an arrangement with his employer where he could trade during business hours and then make up the time after hours. The Tax Commissioner argued that the individual was not carrying on a business of share trading and therefore was not entitled to deductions he had claimed on the premise that a business existed.
The AAT held that, overall, the factors pointing against the existence of a share trading business outweighed the factors that were in the taxpayer's favour. Among various things, the AAT found there was a lack of a regular routine with buying and selling shares in the individual's case, which pointed towards the transactions being made on a speculative basis. The AAT was also of the view that full-time employment went against the conduct of a share trading business.
TIP: If a taxpayer is a share trader, losses may be deductible against other income. If the taxpayer is not a share trader, indexation or the capital gains tax (CGT) 50% discount may apply to reduce the capital gain.