# CFDs and tax



## jiggy (17 December 2006)

Does anyone know how and if you are taxed on Cfd's????

many thanks


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## Fab (18 December 2006)

*Re: CFD's and tax*

I believe CFD profit and losses are treated as income no CGT on it and dividend paid are never franked dividend making them as an income as well.
I am also interested to get on the CFD wagon but don't know much about it, can anyone tell me if CFD works the same as margin loan? Who is the best provider and why? and why are CFD better than warrants and options?


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## It's Snake Pliskin (18 December 2006)

*Re: CFD's and tax*



			
				jiggy said:
			
		

> Does anyone know how and if you are taxed on Cfd's????
> 
> many thanks




I would *bet* that the tax office wouldn't know. Would I be taxed on that bet?


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## bvbfan (18 December 2006)

*Re: CFD's and tax*

CFD's are a taxable investment, that is CGT does apply.

Although most CFD trades are less than a year so discount rules would rarely apply

I think this is what your looking for

http://law.ato.gov.au/atolaw/view.htm?find="TR 2004/D17"&docid=DTR/TR2004D17/NAT/ATO/00001


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## jiggy (18 December 2006)

*Re: CFD's and tax*

Assuming you are on the highest tax rate what vehicle do you BM's use to minimise tax?   Company, family trust etc?


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## Fab (19 December 2006)

*Re: CFD's and tax*



			
				jiggy said:
			
		

> Assuming you are on the highest tax rate what vehicle do you BM's use to minimise tax?   Company, family trust etc?




Good question I am wondering that too. I am on the highest tax bracket too but my wife does not work (Actually earns about $10 000) per year. What I do is invest everything under her name. I am also wondering if there is a more cost effective way of doing that as you said through trust, company or other.


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## TheRage (19 December 2006)

*Re: CFD's and tax*



			
				Fab said:
			
		

> Good question I am wondering that too. I am on the highest tax bracket too but my wife does not work (Actually earns about $10 000) per year. What I do is invest everything under her name. I am also wondering if there is a more cost effective way of doing that as you said through trust, company or other.




This is not financial advice but there will come a point where investing under your wifes name will no longer be as viable as a flat tax rate of 30%. However that point is a long way off for most. I havn't got tax thresholds on hand but you would need to be well into the highest tax bracket and investing a lot under your wifes name for you to benefit from a company structure. When your wifes investments themselves put her into the highest tax bracket obviously a company would be a better option. By the way when you reach this point well done this is what I aspire to.


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## Fab (19 December 2006)

*Re: CFD's and tax*



			
				TheRage said:
			
		

> This is not financial advice but there will come a point where investing under your wifes name will no longer be as viable as a flat tax rate of 30%. However that point is a long way off for most. I havn't got tax thresholds on hand but you would need to be well into the highest tax bracket and investing a lot under your wifes name for you to benefit from a company structure. When your wifes investments themselves put her into the highest tax bracket obviously a company would be a better option. By the way when you reach this point well done this is what I aspire to.




Thanks TheRage that is my understanding too.


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## jiggy (21 December 2006)

*Re: CFD's and tax*



			
				TheRage said:
			
		

> This is not financial advice but there will come a point where investing under your wifes name will no longer be as viable as a flat tax rate of 30%. However that point is a long way off for most. I havn't got tax thresholds on hand but you would need to be well into the highest tax bracket and investing a lot under your wifes name for you to benefit from a company structure. When your wifes investments themselves put her into the highest tax bracket obviously a company would be a better option. By the way when you reach this point well done this is what I aspire to.




What point would that that be?


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## pacer (21 December 2006)

*Re: CFD's and tax*

I'll be able to tell you next year....ATM I have no idea but also no job, and havent had a job or any other income, apart from buying selling shares and stuff, for the last 4 years....

I am happy to pay as much tax as I can....ie I would be earning more....lol

As it is I can write off all my toys as a part of my trade....I need all my toys to keep me sane enough to do this trading stuff, and so is therefore a part of my job....including bourbons.....hehe

EG if you were to pay $50 to goto an ASF party you would claim it as an expense....

Merry Xmas Guys and Gals


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## Fab (21 December 2006)

*Re: CFD's and tax*



			
				jiggy said:
			
		

> What point would that that be?





Good question I would be interest in the answer too ?


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## rub92me (21 December 2006)

*Re: CFD's and tax*



			
				Fab said:
			
		

> Good question I would be interest in the answer too ?




Assuming the short term scenario (i.e. less than 12 months hold for all trades) and assuming no other income. Based on current personal tax rates and x = break-even.

0.30 * x = 17,850 + 0.4*(x-75,000)

Which would make : x = 121,150. So with a trading income more than this, the tax will start to exceed 30% of earnings. When you reach that point you can probably afford an accountant as well  :


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## jiggy (3 May 2007)

*CFD's and Tax*

Since when has tax had to be paid on profits made trading cfd's? Was it only recently after a ruling by the ATO and prior to that no need to? So that in previous financial years, no tax needed to be paid?


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## Uncle Festivus (4 May 2007)

*Re: CFD's and Tax*

As far as I'm aware it always been the other way around - you pay tax on any income/profit unless the tax man says otherwise. I think in England they don't pay tax on CFD's, but in Aus we have always paid it for CFD's, so if you've been making money on cfd's but haven't been paying tax then be concerned.


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## robots (4 May 2007)

*Re: CFD's and Tax*

hello,

if its a hobby you may have a case not to pay tax,

if its some strategic plan, very regular, major part of you're life then more than likely tax payable

thankyou

robots


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## BradK (13 July 2007)

Hi,

I was wondering if someone could give me a quick idea before I go to my accountant on Monday. 

What are the deductions allowed from CFD accounts? 

1. Brokerage? 
2. Interest? 
3. Guarenteed Stop Loss brokerage? 
4. Loss? 

Seems like a murky one for the tax department? 

Brad


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## 123enen (13 July 2007)

*Re: CFD's and Tax*

http://law.ato.gov.au/atolaw/view.h...00001&recStart=1&recnum=8&tot=10&pn=ALL:::ALL


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## CanOz (13 July 2007)

*Re: CFD's and Tax*



BradK said:


> Hi,
> 
> I was wondering if someone could give me a quick idea before I go to my accountant on Monday.
> 
> ...




I'm no expert here....or on anything else so DYOR but.....for the most part, CFD's and thier profits or losses fall quite clearly into two categories, income or a deduction...same goes for the brokerage etc...FROM WHAT I UNDERSTAND.

Cheers,


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## BradK (13 July 2007)

*Re: CFD's and Tax*

Generally speaking then, if you start the year with a CFD balance of 

$10,000 and the balance ends at 

$11,500 - you have a $1,500 taxable income

OR 

$8,500 - you can record $1,500 as a loss


And not have to explain the brokerage, interest, etc. 

Cheers
Brad

PS. Thanks for the tax ruling.


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## kerosam (14 July 2007)

*Re: CFD's and Tax*

15. A gain or loss from a financial contract for differences entered into for the purpose of recreation by gambling will not be assessable income under section 6-5 or section 15-15 of the ITAA 1997 or deductible under section 8-1 or section 25-40 of the ITAA 1997. A capital gain or capital loss from a financial contract for differences entered into for the purpose of recreation by gambling will be disregarded under paragraph 118-37(1)(c) of the ITAA 1997. 

so if i determine my CFDs as a gamble, i don't have to report my gains or lossess then???

anyone care to shed some light?


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## swhmale (14 July 2007)

*Re: CFD's and Tax*



kerosam said:


> 15. A gain or loss from a financial contract for differences entered into for the purpose of recreation by gambling will not be assessable income under section 6-5 or section 15-15 of the ITAA 1997 or deductible under section 8-1 or section 25-40 of the ITAA 1997. A capital gain or capital loss from a financial contract for differences entered into for the purpose of recreation by gambling will be disregarded under paragraph 118-37(1)(c) of the ITAA 1997.
> 
> so if i determine my CFDs as a gamble, i don't have to report my gains or lossess then???
> 
> anyone care to shed some light?




from my experience of just a couple of years trading with man financial gains are considered income and losses are deductions. cfd dividends don't attract franking credits no matter how long you hold the cfd, as you don't hold the actual stop.


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## yonnie (14 July 2007)

*Re: CFD's and Tax*



BradK said:


> Generally speaking then, if you start the year with a CFD balance of
> 
> $10,000 and the balance ends at
> 
> ...




where does it say that you can run your administration like that: difference between start and end of financial year?

if so, is that also for shares providing you run it as a business?

thanks


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## swhmale (14 July 2007)

*Re: CFD's and Tax*



yonnie said:


> where does it say that you can run your administration like that: difference between start and end of financial year?
> 
> if so, is that also for shares providing you run it as a business?
> 
> thanks




of course you must take into account deposits and withdrawals, but essentially losses, short dividends paid, commissions & other costs are expenses, and profits,long dividends received,  & interest received  are income, subtract expenses from income and what you end up with is a trading profit or loss. 
man financial provide a tax year data  excel spreadsheet that details all the necessary info for my accountant.


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