The AAT has found that a taxpayer was not carrying on a business of share trading, and accordingly was not entitled to claim a $20,000 loss resulting from share transactions in the 2011 income year. The taxpayer earned around $40,000 as a childcare worker but turned over approximately $600,000 in share transactions (including both purchases and sales) for the income year.

In determining that the taxpayer was a share investor and not a share trader, the AAT considered each of the key indicators established in case law. The AAT decided that a lack of regular and systematic trade, especially in the second half of the 2011 income year when only 10 transactions were made, went against the taxpayer’s contention that she was conducting a share trading business. Furthermore, the AAT found that the taxpayer’s methods of research (eg reading financial newspapers) lacked the “sophistication to constitute a share trading business”. While the AAT did concede that the capital involved in the taxpayer’s transactions was substantial, it noted that this could indicate either share investment or a business of share trading. The AAT also found that the taxpayer’s alleged business plan was not contemporaneous but was produced only for the purposes of the hearing. Accordingly, as the relevant factors weighed against the taxpayer, the AAT affirmed the Commissioner’s decision to treat the taxpayer as a share investor and to deny a deduction for her losses.

(Re Devi and FCT [2016] AATA 67, AAT, File No 2014/4297, Lazanas SM, 9 February 2016.)