The AAT has held that a taxpayer, through persons appointed as her power of attorney (including her nephew), was not carrying on a business of share trading. As a result, the taxpayer was not entitled to a deduction for a trading loss of some $790,000 in the 2009 income year.

In arriving at its decision, the AAT emphasised that despite the power of attorney, the presumed intention of the taxpayer under the power of attorney was highly relevant and that the taxpayer had no such share trading intentions. In other words, the AAT found that the characterisation of the activities in question was to be viewed “through the prism of the agency” that permitted her nephew to conduct the transactions.

Moreover, the AAT then found it was implicit in the entire arrangement that the taxpayer’s intention was not to conduct a business either personally or through her agent. In this regard, the AAT also noted that the taxpayer had never done so before the appointment, and that her intention had been to generate income from the shares for living expenses. The AAT also found that while the attorneys had incorporated a company and obtained an ABN for the purposes of conducting the transactions, in this context, this did not carry sufficient weight and that, in any event, the actions did not occur (and had no impact) in the income year in question.

In any event, the AAT found that the share transactions carried on by the attorneys on behalf of the taxpayer did not exhibit the required feature of a business and that in the year in which the losses were made, there was little difference in the number and nature of share transactions from prior years. It also found that in the relevant year, a substantial amount of dividend income was derived which, as in prior years, was intended to meet the taxpayer’s living expenses.

(AAT Case [2014] AATA 128, Re Executor for the late Joan E Osborne and FCT, AAT, Ref No 2012/3775, Deutsch DP, Date 10 March 2014.)

[LTN 47, 11/3/14]