ATO Community

Re: Sale of shares - Normal income or capital gains event ?

Devotee

Views 184

Replies 2

Hi , Please assist me.

 

If a business  decides to buy and sell shares as an additional form of income, should the share sales be categorised as normal non - capital income ?

 

The exiting line of business is in manufacturing industry.

 

As far as  I know the deciding factor would be the intention ,

 

If  the shares were bought as an investment ( expecting dividends/ disposal gains) then its a capital event.

If  to be traded as buy & sell ( mainly gains) then normal income.

 

So how could a buiness substantiate its intention  ? Would a mere statement that  " I (business owner)  bought the shares with the intention of buy & sell " be enough as proof ?

 

E.g  During a financial year a business buy a set of shares  ( Intention is buy and sell) . But desipite the ability to dispose and an earn  a profit , the business holds on to the shares expecting the value to apprecciate more.

 

 

Also this is the only purchase it made in a while ( no regular buy and sell)

 

After a few years the disposal is made and  owner expects to account as normal income . Is it allowed ?

 

How regularly should buy and sell happen to convice ATO that it indeed is buy and sell ?

 

What substantiation is required ?

 

Sorry for the too many questions.

 

Thank you

 

 

 

 

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

Devotee Registered Tax Practitioner

Replies 1

If a business  decides to buy and sell shares as an additional form of income, should the share sales be categorised as normal non - capital income ?   Also this is the only purchase it made in a while ( no regular buy and sell)

How regularly should buy and sell happen to convice ATO that it indeed is buy and sell ?

 

Capital gains, because not a share trader.

 

https://www.ato.gov.au/General/Capital-gains-tax/Shares,-units-and-similar-investments/Shareholding-...

 

So how could a business substantiate its intention  ? Would a mere statement that  " I (business owner)  bought the shares with the intention of buy & sell " be enough as proof ?

 

You will be judged by your actions, not just documents.

It could be that this was a profit-making scheme  -  profit taxed as income.

 

 

Documentation for intention should have been created before the purchase

2 REPLIES 2

Most helpful response

Devotee Registered Tax Practitioner

Replies 1

If a business  decides to buy and sell shares as an additional form of income, should the share sales be categorised as normal non - capital income ?   Also this is the only purchase it made in a while ( no regular buy and sell)

How regularly should buy and sell happen to convice ATO that it indeed is buy and sell ?

 

Capital gains, because not a share trader.

 

https://www.ato.gov.au/General/Capital-gains-tax/Shares,-units-and-similar-investments/Shareholding-...

 

So how could a business substantiate its intention  ? Would a mere statement that  " I (business owner)  bought the shares with the intention of buy & sell " be enough as proof ?

 

You will be judged by your actions, not just documents.

It could be that this was a profit-making scheme  -  profit taxed as income.

 

 

Documentation for intention should have been created before the purchase

Devotee

Replies 0

@Bruce4Tax Thank you