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27 Aug 13 Taxpayer not conducting a share trading business - Hartley

The AAT has held that the taxpayer, a full-time council employee, was not conducting a business of share trading and was thus not entitled to claim losses in respect of his activities.

In the 2010 year there appears to have been 40 transactions with turnover of $934,575 and in the 2011 year there appears to have been 25 transactions with turnover of $385,938. The sales that took place were on average for an amount in the order of $40,000 per parcel.

The AAT determined the issue by considering a number of accepted factors suggested by Deputy President Todd in AAT Case 6,297 (1990) 21 ATR 3747, which was cited with approval by Senior Member Block (as he then was) in Re Shields and Deputy Commissioner of Taxation [1999] AATA 4; (1999) 41 ATR 1042 at 1048.

These factors were:

"(a) the nature of the activities and whether they have the purpose of profit-making;
(b) the complexity and magnitude of the undertaking;
(c) an intention to engage in trade regularly, routinely or systematically;
(d) operating in a business-like manner and the degree of sophistication involved;
(e) whether any profit/loss is regarded as arising from a discernible pattern of trading;
(f) the volume of the taxpayer’s operations and the amount of capital employed by him;
and more particularly in respect of share traders:
(a) repetition and regularity in the buying and selling of shares;
(b) turnover;
(c) whether the taxpayer is operating to a plan, setting budgets and targets, keeping records;
(d) maintenance of an office;
(e) accounting for the share transactions on a gross receipts basis;
(f) whether the taxpayer is engaged in another full-time profession."

Applying these factors to the facts of the case, the AAT held that "while the matter is finely balanced...those factors pointing against the existence of a share trading business are more significant than those pointing in favour of the existence of a share trading business". The Commissioner's objection decision was upheld.

Hartley and FCT [2013] AATA 601 (AAT, Professor Deutsch DP, 26 August 2013).


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