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Trust Operating as A Business

Discussion in 'Accounting, Tax & Legal' started by DaveA, 13th Mar, 2007.

  1. DaveA

    DaveA Well-Known Member

    19th Feb, 2007
    Sydney, NSW
    i was reading something a few weeks ago about if something operates a business which is whole investing, all capatial gains become income and hence there is know 50% discount. The particular article was realting to share day traders (not property), and im pretty sure the business structure was a company not a trust.

    Anyway im not wondering could the same principals apply if a trust was classified as running a business (soley investing) would capatial gains still be CG?

    Ill try dig up the source of the information ( i think it was the SMH)
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

    9th Jun, 2005
    Sydney, Australia
    I think "investing" is the wrong term to use.

    If you were running a business of trading shares, or if you were running a business of developing property to on-sell (ie trading property), then there would be grounds to treat capital gains as income.

    I'm not sure you could run a business of "investing" as such (ie holding assets) ... they are assets and not "stock" to be traded.

    Again, you won't find any rules about this - it comes down to the circumstances, and more importantly, the intent of what you are doing.

    If your intent is to save tax - you'll find yourself in trouble. If your intent is to produce income by trading (buying and selling) shares/property/etc ... then I think you have grounds for going down that path.

    Don't forget that the 50% CGT discount on capital gains by individuals is one of the best tax breaks you can get - and you only pay that when (or if) you sell, which makes it better still.

    Buying growth assets and holding them long term is one of the easiest ways to wealth (in my opinion) ... and it works far better for creating wealth than saving tax does!!