The AAT has held that a taxpayer was a share trader for the year ended 30 June 2009.
The taxpayer sold an investment property in 2005 and decided to operate as a trader in shares. To this end, he reduced his hours of work in his primary occupation from 70 to 80 hours a week to 35-40, and made a conscious decision to spend 35-40 hours per week on share trading. Apart from capital of his own of $150,000, the taxpayer borrowed $500,000 as a margin loan from Bankers Trust Australia. The taxpayer also set up a dedicated office at his home, upgraded his computer, and purchased an electronic whiteboard and other office furniture such as a desk, chair and filing cabinets. He also invested in accounting software.
The ATO assessed him on the basis he was not a share trader and denied him a deduction for non-primary production losses in the sum of $117,639 and imposed a penalty of just over $12,000 for failure to take reasonable care. The taxpayer appealed to the AAT against the Commissioner’s disallowance of his objection.
The Commissioner submitted that the taxpayer did not apply any “business acumen” to his share trading, but simply adopted advice generally. The Tribunal disagreed and held that the taxpayer had satisfied it that his activities amounted to the carrying on of a business in the tax year ended 30 June 2009. The AAT therefore set aside the objection decision under review and remitted the matter to the Commissioner with the direction that in the tax year ended 30 June 2009, the taxpayer carried on the business of trading in shares. The Tribunal also directed that the penalty already imposed was to be remitted.
(AAT Case [2012] AATA 208, Re Mehta and FCT, AAT, Ref: 2011/2220, Allen SM, 13 April 2012.)
[LTN 75, 20/4]