Share trader v share investor

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    This may seem like an inane question, but here I go.

    I am fully aware of the ATO's definition and distinction between share trader and share investor, and how this impacts taxation.

    For example, a share trader is able to book profits from the sale of shares as income, rather than capital gains, and vice versa. A share trader can also use associated costs as a deduction on income, rather than alter the cost base of the asset.

    I am also aware that certain listed investment companies, such as AFIC, Argo etc. are recognised as investor based LICs and have certain concessions for distributing discounted capital gains.

    Conversely, the majority of LICs are considers traders and are not permitted to distribute capital gains to investors.

    My question is this:

    Why do high turnover managed funds, which predominantly book profits through the sale of shares, designate such sales as capital gains?

    Given the differentiation between investor and trader, I would have assumed such sales would be booked as income and distributing accordingly, rather than capital gains. After all, they are in the business of making money from the buying and selling of shares.

    I am most likely missing something. I just can't work out why, given the concessions for traders, these are being booked as capital gains, rather than income.
 
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