The ATO’s actions and the law were criticised by a Federal Court tax judge at a Taxation Institute conference, just recently.

The ATO’s opinion seems to be that the rule on a Capital Gain applies if there is a single transaction, but if it is part of your activity/business then the rule shouldn’t apply.  This distinction has become extremely important here, because a non-resident does not pay capital gains tax on the sale of public company shares.

In other words the distinction between a capital transaction and an occasional transaction as normal income has now become more blurred.

How many times can a single transaction be repeated before it is a normal part of business activity?  In this case, the first transaction is the one under attack.

The ATO argued in the TPG-Myer float case that everything was normal income.

The ATO is will be communicating their opinions about the distinction between capital income and there will be a series of tax cases on the deductibility of capital losses in Trusts.

If you are disappointed when your adviser is not always able to answer the question ‘is it taxable’, then take comfort from a very senior Federal Court tax judge who doesn’t know either.