Share traders 043-03040000

Share traders buy and sell investments more frequently than a person who is merely an investor in the same product. The main activity is usually with listed securities (shares or another security listed on the stock exchange) within Australia or overseas, but can be other financial investments that are tradable. Their objective in buying and selling investments is to make a profit from this trading.

Generally, it will be accepted that a customer is a share trader if their personal and business income tax returns (ITRs) specify investment trading as the main activity undertaken by the business.

For sole trader and partnership cases, Service Officers assess the business income and assets.

Customers may undertake share trading activities through private trusts or private companies. For private trusts and private company cases, or where the partnership needs a Complex Assessment Officer (CAO) assessment, make a CAO referral.

If not provided, make a request for information to get a copy of the customer's personal and business income tax return (ITR) and financial statements, as well as their partner's ITR if they are involved in the business.

Note: if a person or family company is trading in shares (securities or investments) owned by themselves or their family this would not considered to be gainful work for the purpose of passing the work test for the PBS.

Is customer considered a share trader?

• Yes, go to Step 2
• No, investments of the sole trader or partnership business are assessed as financial assets of the owner(s) of the business, and the income assessments are determined through application of the deeming provisions. To assess financial assets owned by a business that is not considered a share trader:
• for sole traders, see Assessing sole trader income and Assessing sole trader assets
• for partnerships, see Assessing partnership income and Assessing partnership assets

Deeming does not apply to financial investments held as assets of a business where these assets are part of the operation of the business. The investments held by a share trader clearly constitute assets that are integral to conducting the activities of such a business. Therefore, all investments held by a sole trader or partnership undertaking business as a share trader are exempt from assessment of income under deeming rules. The income to be maintained from dealing in investments is the assessable business profit earned from these activities.

• If the business receives a small amount of income from activities other than investment trading, the usual rules regarding offsetting losses against profits from other business activities apply. See Offsetting profit and losses between businesses

Note: the general exemption to assessment under deeming applies only to investments held as part of the investment trading activities. Where a business operates in more than one field, any investments held which relate to the other business activities are assessed under the normal rules applying to investments held by a business.

As deeming does not apply to investments held as assets of a business operated as a share trader, deductions allowed under section 1075 of the Social Security Act (SSA) 1991 are allowed against the profit earned from investment trading when determining the assessable income in regard to the business.

This means that expenses such as interest brokerage fees, bank fees and charges, are allowable business deductions.

Deeming provisions in section 1075(2) of the SSA do not apply in these circumstances.

For sole traders and partnerships, see Assessing sole trader income or Assessing partnership income.

The value of the portfolio of investments held as assets of a sole trader or partnership operated as a share trader, as stated on the business balance sheet, is assessed for Assets Test purposes.

Taking into account the nature of the activities undertaken by a share trader, this value is considered to provide a reasonably accurate indication of the current market value of investments held by a share trader.

If the business has assets other than investments, these are assessed at current market value and included when determining the overall value of the business.

Note: if the business has other investments which are not held as part of the investment trading operations (that is, where the business operates in more than one field), these investments are subject to the usual rules applying to financial investments held by a business. The assessment of these investments is dependent upon whether they are regarded as business assets, or the personal investments of the customer.

For the Income and Assets Test assessment of investments held by sole traders and partnerships respectively, see Assessing sole trader assets or Assessing partnership assets.

When the income and assets have been determined for the share trader business, update the customer's (and partner's if applicable) or entity's record.

See Assessing and coding the Business details for sole traders and partnerships Mod F.

Code the Business Detail (BUS) screen with the business details for sole traders and partnerships. See the appropriate link below for any extra assistance required:

• Assessing sole trader income
• Assessing sole trader assets
• Assessing partnership income
• Assessing partnership assets

Advise the customer of the assessment including how the determination was reached, for example, how valuation of the portfolio of investments has been made. The advice should also inform the customer of their obligations to notify of any increase in the income or asset position of the business.

The customer should also be advised of the requirement to provide the annual business ITR, financial statements and customer's (and partner's if applicable) personal ITR.