Taxpayer not a 'share trader' despite substantial share trades
The Facts
The taxpayer (who otherwise worked as a child care educator and earned approximately $40,000 in wages) started trading shares in July 2010, utilising her (and her husband’s) savings of approximately $60,000 and a margin loan of initially $40,000.
During the 2011 income year, she made:
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71 purchases to a value of $379,630; and
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37 sales to a value of $215,019.
She made a loss on her share transactions during the 2011 income year to the order of $20,000, and she was seeking to claim that as a deduction.
The Decision
The Senior Member of the AAT considered the following factors in deciding that the taxpayer was not a share trader.
Factors in favour:
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the turnover was substantial, particularly having regard to her wages; and
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the taxpayer maintained a home office for the purpose of undertaking the share transactions.
Factors against:
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the share transactions were not regularly and systematically carried out throughout the 2011 income year – the bulk of the transactions took place in the first 6 months of the 2011 income year, with only 10 transactions of approximately $70,000 in the second half of the financial year.
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the activities were very basic and lacked sophistication to constitute a share trading business;
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there was no demonstrated pattern of trading, although it was accepted there was a business plan even before she later produced written evidence of this; and
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she had no skills or experience or prior interest in shares.
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