# Forex and Taxation



## Spanning Tree (24 December 2008)

Hi, I am a big newbie to forex. Are forex gains subject to capital gains tax like stocks are? What is the tax law with regards to switch from one currency to another?


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## SoBadAtTrading (24 December 2008)

Can one be considered a forex trader as in share trader since forex trading is usually done on a short-term basis?? Isn't forex trading sort of like CFD trading because of the leverage used/market makers?


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## Lammii (24 December 2008)

to my understanding it depends on frequency of trading and whether you trade for income or investment.

if you trade as your primary source of income then it is not capital gains taxable

if you are investing and have a primary source of income elsewhere then it is capital gains taxable

i tried to look at the ATO site to find the exact criteria but found this:
"All Tax Office systems and services, including our website, will be unavailable from 4pm AEDST on Wednesday 24 December 2008 until Monday 5 January 2009 while we complete essential maintenance at our data centres."


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## bigredasf (28 December 2008)

Lammii said:


> to my understanding it depends on frequency of trading and whether you trade for income or investment.
> 
> if you trade as your primary source of income then it is not capital gains taxable
> 
> if you are investing and have a primary source of income elsewhere then it is capital gains taxable




That is more or less ruling I got from the ATO after contacting them a number of time.
 I am sure a couple of the staff I talked with thought FOREX TRADING was swaping a full slab of XXXX for a six pack of VICTORIAN BITTER.:dunno:


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## SoBadAtTrading (28 December 2008)

bigredasf said:


> Lammii said:
> 
> 
> > to my understanding it depends on frequency of trading and whether you trade for income or investment.
> ...




what about forex trading as secondary source of income? how would that count? Seems very confusing.


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## theasxgorilla (28 December 2008)

bigredasf said:


> That is more or less ruling I got from the ATO after contacting them a number of time.
> I am sure a couple of the staff I talked with thought FOREX TRADING was swaping a full slab of XXXX for a six pack of VICTORIAN BITTER.:dunno:




Haha, well, if you traded a slab of XXXX for a slab of VB then you're clearly making a capital gain, and if you did it often enough I expect the ATO would say it's a source of income


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## theasxgorilla (29 December 2008)

SoBadAtTrading said:


> what about forex trading as secondary source of income? how would that count? Seems very confusing.




Usually it works like this.  If you are trading frequently enough, and you can show that you are set up to trade in a business like manner, with the intention of making an income from your trading activities then you might get the ATO to treat your trading activities as a source of income.  The advantage here then becomes that you can deduct trading activity related expenses against this income stream.

If you are unable to convince that tax department that you are set up as above then your trades will be treated as capital gains/losses and you can only offset them against gains and losses from other such activities.

When it comes to sending money back and forth for the purposes of moving savings around or to buy things overseas I've never heard of anyone needing to pay tax on any favourable outcome they experience from doing this.  It would seem pretty difficult to enforce anyhow...and it would become like a kind of tariff on imported goods.


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