Decision Impact Statement
The Taxpayer and Commissioner of Taxation
 AATA 545
2011 ATC 1-037
84 ATR 659
Venue: AAT, Brisbane
Venue Reference No: 2010/4083
Judge Name: Senior Member Bernard J McCabe
Judgment date: 5 August 2011
Appeals on foot:
Administrative Treatment (Implication on current Public Rulings and Determinations)
Taxation Ruling TR 97/11
Business of share trading
Outlines the ATO's response to this case which concerns whether the taxpayer was engaged in the business of share trading during the income tax year ended 30 June 2008.
Brief Summary of Facts
The applicant is the chief executive of a profitable services business conducted by a subsidiary of a holding company that the applicant controls. The day-to-day management of the services company has been delegated to competent executives, which enables the applicant to pursue a range of investment interests. The applicant also controls two other companies that invest in property and share markets. The applicant also has investments in shares and property in his own name.
The applicant registered with Commsec and arranged a margin load facility in late 2004. The applicant acquired some shares in 2005. The applicant became involved in a stock-picking and research service called Stockval in October 2006. The applicant purchased a licence from Stockval and became entitled to receive the firm's regular research and advice on share market opportunities. The licence is current and runs until 2012. The applicant also conducted his own online searches on the Commsec website and elsewhere, and talked to people in the market like his broker.
The applicant's strategy was to buy stocks that were out of favour at a low or falling price and wait for the price to rebound when the shares could be sold and a profit realised. However there was no formal business plan.
The applicant's pattern of buying and selling shares did not demonstrate that the applicant was turning over the shares he acquired. The applicant attributed the lack of turnover of shares to the global financial crisis which first started in 2007 and deepened in 2008, and the applicant's preference to hold onto the blue chip shares to maintain his Commsec margin loan facility.
The applicant's financial commitment was relatively large and the applicant managed his share trades on his own. The applicant conducted his trades from his laptop computer or mobile phone.
Issues decided by the Tribunal
The applicant was in the business of trading shares during the income tax year ended 30 June 2008 based on the following:
- The applicant intended to make a profit out of his activities during the year of income and the applicant initially intended to make that profit in the short term.
- The applicant did not engage in an academic pursuit or a hobby.
- The applicant's subjective and objective intention of the activity suggested the motive was profit.
- The applicant had several million dollars at stake.
- The applicant regarded it as a serious business.
- The applicant intended to make regular trades, even though it turned out to be acquisitions rather than sales.
- The applicant behaved in a systematic strategy. It was not detailed, scientific or formal but the applicant was not investing on a whim.
- The applicant operated in a business-like manner - the applicant conducted his business from his laptop computer or mobile phone, the applicant kept his records online and entered into arrangements with a broker and Commsec.
The Tribunal was satisfied that the applicant was a witness of truth.
ATO view of Decision
The case was decided on its facts and the decision that the taxpayer was conducting a business of share trading was based on the findings made by the Tribunal. As the decision was based on the specific facts of the case, it will not have any impact on any existing or future litigation proceedings.
Implications for ATO precedential documents (Public Rulings & Determinations etc)
Implications for Law Administration Practice Statements
We invite you to advise us if you feel this decision has consequences we have not identified, or if a precedential decision such as a Public Ruling or an ATO ID requires reconsideration or amendment. Please forward your comments to the contact officer by the due date.
| Date Issued:
||1 November 2011
| Due Date:
||27 December 2011
| Contact officer:
| Email address:
||(02) 9374 8303
||(02) 9374 8628
||52 Goulburn Street, Sydney, NSW, 2000
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