# Tax over forex operations



## dmalcantara

Hi,
I started trading on forex market in Australia(easy-forex) and I'm trying to find out information about taxation over forex operation. Does anyone know where can I find such information?

Thanks,


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## Stormin_Norman

as far as i understand it gets treated as income.


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## tayser

treated the same way as equities - CGT.


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## Andruha

tayser said:


> treated the same way as equities - CGT.




The rules have changed of late - since the beginning of GFC a lot of people filled for Capital Gain Loss in 2007/2008 financial year. Government decided to protect itself from such a big amount of claims in the future and changed a CGT legislation last year. In order to claim capital loss one have a professional full time trader and there are number of criteria that will classify one as a professional trader. I do not remember them all but the main one that stood out was that you have to have a 20000 turnover per financial year. If you do not - than you are not full time trader and thus cannot apply for capital loss. Since capital gain is the opposite to capital loss, you are not going to get slapped with CGT unless your turnover is less then 20000.


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## Mr J

Kind of related, anyone got any views about potential transaction taxes (such as Tobin or those suggested in the US)? There's been some talk about it for a while on some other sites. So far it seems that anyone suggesting it has had no idea how markets work, or perhaps seek to kill shorterm trading completely? The arguments are that the UK has it (but not without exemptions!), and that such a small amount (0.25% - ) would have a negligible effect on the markets eek.


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## Grinder

Andruha said:


> In order to claim capital loss one have a professional full time trader and there are number of criteria that will classify one as a professional trader. I do not remember them all but the main one that stood out was that you have to have a 20000 turnover per financial year. If you do not - than you are not full time trader and thus cannot apply for capital loss. Since capital gain is the opposite to capital loss, you are not going to get slapped with CGT unless your turnover is less then 20000.




Does that mean any funds transfered overseas are to be claimed as a CG or CL if your classified as a trader, but not a forex trader??


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## Andruha

Grinder said:


> Does that mean any funds transfered overseas are to be claimed as a CG or CL if your classified as a trader, but not a forex trader??




For Australian government the trader is any person involved in trading activity be it forex, commodities or equities. As long as you satisfy the conditions.

Anyhow, the only time you have to pay CG or CL if you actually enquired losses or gains from investment (again I mean the range of investment - forex is just one of them). Now if you transfer money overseas why would it be CG or CL, unless you lost money trading on overseas account? Or did I misunderstood your question?


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## Stormin_Norman

Mr J said:


> Kind of related, anyone got any views about potential transaction taxes (such as Tobin or those suggested in the US)? There's been some talk about it for a while on some other sites. So far it seems that anyone suggesting it has had no idea how markets work, or perhaps seek to kill shorterm trading completely? The arguments are that the UK has it (but not without exemptions!), and that such a small amount (0.25% - ) would have a negligible effect on the markets eek.




tobin tax is for simpletons.

having govts balance budgets and spend less. that's the tax solution.


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## alwaysLearning

Mr J said:


> Kind of related, anyone got any views about potential transaction taxes (such as Tobin or those suggested in the US)? There's been some talk about it for a while on some other sites. So far it seems that anyone suggesting it has had no idea how markets work, or perhaps seek to kill shorterm trading completely? The arguments are that the UK has it (but not without exemptions!), and that such a small amount (0.25% - ) would have a negligible effect on the markets eek.




They are bastards (my opinion) for even suggesting a tax on forex trades 

What a joke..

http://blogs.reuters.com/james-peth...50-billion-a-year-financial-tobin-tax-really/



> 1)  Even a 0.10 percent tax would double the cost of US stock trading where the average commission cost is just under a dime. Welcome back to the pre-Internet early 1990s.
> 
> 2) It would reduce market volumes and make the equity market less attractive. Kind of dumb thing to do in a time of constrained credit markets where it is tough to raise money.
> 
> 3) That supposed $100 billion-$150 billion in revenue wouldn’t appear out of thin air. It would come from investment firms who would pass along costs to customers.
> 
> 4) It would drive trading activity to less costly trading centers, such as the Toronto Stock Exchange (at least if we are talking about the US). Goodbye US jobs.


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## Mr J

It's horrible joke. These clowns obviously have no idea what it will do to leveraged markets such as forex or futures. On the SPI, the tax would be worth say 9 points (4-5 each way) at 0.1%, and ~24 at 0.25%. 24 points! This is on top of 1-2 points of spread, and then we have to consider how much the spread (and possibly commission?) would widen due to less participation. God knows what sort of timeframe I would have to trade to overcome 25+ points of transaction costs. If the west really insist on doing this, at least the Asian session will see higher participation .


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## lusk

I can’t see this happening to Forex as how the hell do you tax Forex as there’s no exchange. If they did it would be taxing central banks as they are the big players. 

If it was only a tax on retail traders it would be stupid as retail traders are the liquidity for the big movers so l can’t see them making it unattractive to trade Forex and pushing them away.


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## Wysiwyg

dmalcantara said:


> Hi,
> I started trading on forex market in Australia(easy-forex) and I'm trying to find out information about taxation over forex operation. Does anyone know where can I find such information?
> 
> Thanks,



The AUSTRALIAN TAXATION OFFICE.


You probably aren`t around any longer but if you are I can tell you if you are a sole trader as in a small business operation (which I am) then you treat your financials as : Assessable income (e.g. profits/losses on equities, forex etc.) minus Allowed Deductions = Taxable income. It`s that simple.

 As was mentioned before there are requirements to be met to be considered as carrying on a business as a sole trader some of which are; turnover/frequency of trading, book keeping, lodging an annual income tax assessment and responsible trading.  

Some deductions particular to a sole trading business :

    * bank fees and charges
    * decline in value of depreciating assets (depreciation)
    * electricity
    * hire or lease of plant and equipment
    * home office expenses
    * interest on borrowed money
    * phone expenses
    * registered tax agent fees
    * rent or lease of business premises (including home business premises)
    * repairs
    * trading stock
    * transport and freight.


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## Grinder

Andruha said:


> For Australian government the trader is any person involved in trading activity be it forex, commodities or equities. As long as you satisfy the conditions.
> 
> Anyhow, the only time you have to pay CG or CL if you actually enquired losses or gains from investment (again I mean the range of investment - forex is just one of them). Now if you transfer money overseas why would it be CG or CL, unless you lost money trading on overseas account? Or did I misunderstood your question?




Query was in relation to funds that are transfered overseas to a different currency thus incurring a change in value. I presume when you return the same funds back that is where the CL or CG is calculated?


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## Andruha

Grinder said:


> Query was in relation to funds that are transfered overseas to a different currency thus incurring a change in value. I presume when you return the same funds back that is where the CL or CG is calculated?




I my understanding (and I'm not an accountant) there has to be a change in *capital value*. So if you transferred say A$ 1 into a trading account and converted it to USD but decided not to trade and exchanged it back at the same rate. This should not incur any CG as you did not actually gain any capital value on your investment (changing from one currency to another does not matter in small quantities any way - I'm sure lots of us go on holiday to US or any other country converting cash and then bringing it back. Did you ever heard anyone saying after the trip overseas - "Oh well the exchange rate went up while I was away so if I change the left overs I have to go and pay CG.") However if you traded for a while and actual were profitable then anything that you will convert back to AUD and bring over will incur CG.

Hope that helps...


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## Grinder

Andruha said:


> However if you traded for a while and actual were profitable then anything that you will convert back to AUD and bring over will incur CG.
> 
> Hope that helps...




It does help and thats my essentially my query. I think there are other elements at play such as international tax law also. This is my take on it:

P/Ls incurred through the buisness of trading equities in the US is claimed against your income. 

Lets say $10000 AUD to USD at .80c would get $8000 USD. 

These funds were used as trading equities, whether there is a P or L through trading, that has already been accounted for in the trading calculations. So all that is left is the completed transaction of returning $8000 USD to AUD, which lets say is at 1.10c, would get $8800 AUD thus incurring a $1200 CL that is added against my income.

Am I correct in using this method. My accountant says so, but that does'nt mean much. How do others determine this?


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## >Apocalypto<

tayser said:


> treated the same way as equities - CGT.




I just closed a trade in under 10min for a profit of 8000 Yen, how can that be treated as anything else but income tax!


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## Andruha

I should have some info that my accountant gave me this year in regards to when one can consider itself as a trader and thus incur CG or CL. 

Otherwise if you do not classify as one than it is simply your income + profit from trading taxed at your marginal rate....

I'll uploaded some time this week (just the matter of finding it)


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## Krusty the Klown

Proceeds from forex are treated the same way as financial derivatives.

A trader can treat them as ordinary income.

A taxpayer who has a one off, irregular or occasional forex event will use the capital gains provisions to treat the income.

If its a few hundred dollars left over from an overseas trip and you make a small profit or loss the ATO is not concerned.

If its a corporation parking $5M for a few days offshore, they are interested.

Think of it as if the event or activity was conducted for profit, then its assessable

The ATO website is the first place to start, a much better alternative is the Aust Master Tax Guide - $150 or your local library.


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## Grinder

thanks for the info Krusty, your a wealth of knowledge. Will hunt down that book. Found some info on the ato website but like to get the thoughts of fellow ASFs

In a nutshell, am classified as a trader and am looking to write off as much as I can to offset a descent sized CGs, therefore need to start creating some losses. Have exhausted all possibilities and am now looking at currency conversion as an option. Have'nt been transfering funds back to Oz, so was hoping other traders could shed some light on my prevoius email as to how it's calculated, can't seem to find anything concrete.


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## The Estimator

Bit of a grave dig but it is along the same lines of the thread.

What if you open an account with an overseas forex broker?  Could you effectively trade this account indefinitely without a capital gains event provided you don't withdraw money?  That way the trading capital wouldn't be reduced each year at tax time.


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## wgrevillefx

some key points I have found;

1) worldwide income
2) when profits are realised ( this is a strange one for people who trade every day, and trade a lot. )
3) losses are held for future profits, not the other way around


to me; 
sounds like they don't want us to compound our winnings while its in the account, we have to pay tax on the 
amount in the account, not when we get it out, hence "realised."

sounds like they really just want us to create an offshore company and then trade offshore, then bring it back
that's so that we don't pay tax on the compounded earnings, I think they are telling us something interesting.
In other words, if we have to pay on "realised" profits, and they determine it's when the trade is over, not when we pull it out of the account, then there's the tricky bit.  It increases our tax rate by a lot more than just a few percent.

why would they hinder traders to actually make money in their account ???  just because it's cash ? and somewhat liquid ?   I really think of that money as working capital, and when I am trading it in an account, I shouldn't have to pull it out to pay taxes, until I pull it out to realise my own profit.  So that's a bit strange to me.



Again, I need a tax lawyer for this one.


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