Previous Earnings: trading income allowable?

[wirapundi]

Hello

I would really appreciate some advice regarding if this would be allowable for part of my previous earnings requirement. Certainly the policy guidance does not seem to shed any light on this specific situation.

I actively trade Put and Call Options on the Australian Stock Exchange (whilst also being employed and living in London). I submit personal Australian Tax returns and pay tax on this income at the nominal personal tax rates in Aus. There are associated brokerage fees etc and I essentially pay tax on the profits generated. Do you suppose supported by all the relevant documentation that this profit would be considered as previous earnings?

Thank you

Regards,

Shane

[Lucapooka]

I think this falls between the two stools of earnings from business activity (allowed) and interest on investments (disallowed). If you can show that it's a business activity, that you have established a business that trades in the options market, then it will be be allowed. You'll will need business accounts (or whatever type of official financial reporting methods exist in Australia) and tax records. However, from what you stated it sounds like your activity is that of a private investor and there is no business structure.

Do you actually need to include this gain to qualify for an extension or otherwise you will have a points shortfall? If you do, then go ahead and include it (cos it's not as though you have any other viable option and, you never know, it may even be accepted). If you don't need to include this gain to garner sufficient points then whether or not it's allowable will not really matter.

[wirapundi]

Hi Lucapooka, thanks for your reply.

My issue is that I’m employed by an overseas based consultancy that allows us to set our uk income at lower level, for the obvious tax benefit. So if I left my salary at its current level, I would not have enough to satisfy the previous earnings requirement. But my visa doesnt expire for 6 months, and I have the option to increase my salary should I wish, although of course I would like to avoid doing this and instead use my trading income.

I suppose this begs the next question which would be exactly how would I need to present the documentation to ensure it was considered as business activity? Previously it has been lodged on my Australian tax return as a business activity item, so perhaps I can include like this. Along with the accountants letter worded to that effect also. Any other suggestions?

Thanks