Do you know how to differentiate a share trader from a share investor for tax purpose? For Hartley vs The Commission of Taxation (2013) case, the Administrative Appeals Tribunal (AAT) had decided that, while a few determinants seemed to indicate that the taxpayer was carrying out a share trading business, they should be considered as a share investors instead.
The considerable turnover that Hartley made was notably interesting, it even exceeded $900,000 in one of the years. Generally, there were more than 20 transactions per year, at times there were up to 40 and the taxpayer had maintained his records and accounts of the transactions. This “trading” activities were all carried out in a separate office.
Yet, the above factors are not enough to justify that he is conducting a share trading business because:
- There were no regular routine in his action of buying and selling shares
- There was no systematic method that the taxpayer adhered to
- There was no target-setting
- There is no demonstration of having conducted any background research of the shares
- There is the fulltime work that the taxpayer is engaged in
Another recent case, in which the Commission had also won, confirms the level of scrutiny that needs to applied in determining the status of a taxpayer ie whether as a share trader or a share investor.