Taxpayer’s operations didn’t stack up as a share trader

Taxpayer’s operations didn’t stack up as a share trader

This case involved a council worker who claimed that he was also a share trader, not merely a share investor. While the AAT member said that it was more than a hobby, he said that it was not a business. Strange? Wouldn’t one think that if it was more than a hobby, it had to be a business? Facts The taxpayer’s share market activity appears to have been fairly active although there was a slowing of such activity in recent times. In the 2010 year, there were 40 transactions with a turnover of $934,575 and in the 2011 year there were 25 transactions with a turnover of $385,938. The sales that took place were on average for an amount in the order of $40,000 per parcel. In addition, the taxpayer maintained an office specifically for the purpose of conducting his share trades and for accounting and tax calculations. However, the AAT member found that the following negative factors outweighed the positive factors above:

• the buying and selling of shares was not regular or routine;
• there appears to have been very little in the way of a plan although belatedly a written plan was produced;
• very little appears to have been done in terms of setting budgets and targets;
• there was very little in the way of contemporaneous documentary evidence showing that the taxpayer conducted research in respect of companies in which he either purchased shares or considered purchasing shares;
• there was little in the way of profit forecasts, risk management strategies, periodic performance reviews or forward planning; and
• the taxpayer was engaged in another full-time profession as a council employee.

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