Hill and Commissioner of Taxation (Taxation)

This matter concerned an appeal by the taxpayer against a decision of the Commissioner of Taxation disallowing a deduction for a loss incurred in the purchase and sale of shares. The Administrative Appeals Tribunal was required to determine whether the taxpayer was carrying on a share trading business for the purposes of the Income Tax Assessment Act 1997.

The Tribunal considered various factors established in case law to ascertain whether a business was being carried on, including the nature of the activities, profit-making purpose, complexity and magnitude, intention for regular and systematic trade, business-like operation and sophistication, and the volume of operations and capital employed. Specific to share trading, the Tribunal also examined repetition and regularity of trades, turnover, whether the taxpayer operated to a plan, maintained an office, accounted for transactions on a gross receipts basis, and whether they were engaged in another full-time profession.

The Tribunal found that while the taxpayer had established a separate office and made a significant investment, their share trading activities lacked the necessary system, regularity, and sophistication to be considered a business. The trading was infrequent, characterised by long periods of inactivity, and largely confined to a few shares. The taxpayer was also employed full-time in the aviation industry for most of the relevant period, indicating the share trading was a side issue. The Tribunal concluded that the activities were more akin to a series of individual speculative transactions rather than a discernible pattern of trading conducted in a business-like manner.

Consequently, the Tribunal affirmed the Commissioner's decision that the taxpayer was not carrying on a share trading business and was therefore not entitled to a deduction for the loss incurred.