Profits from isolated transactions will often be potentially caught by the capital gains tax provisions of the income tax legislation. Because the provisions usually tax gains at concessional rates but only apply to gains that are not otherwise taxable, it is important to determine when gains from isolated transactions constitute ordinary income. This article discusses when isolated transactions generate ordinary income, as well as briefly mentioning what statutory provisions they might be assessable under. Isolated transactions will generate ordinary income when the transaction has the sufficient indicia of a business, or when it comes under one of the strands of Commissioner of Taxation (Cth) v Myer Emporium Ltd (1987) 163 CLR 199. However, the law in this area is complex and unclear in parts. The relevant tax ruling, TR 92/3, is incomplete and at times inaccurate and so is of very limited assistance.
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