ATO ruling on CFDs for Super

[CitySlicker]

I dunno if people have heard yet, but the ATO has made a ruling that super funds can now trade CFDs.

I don't reckon it's that big a deal, given that they've been able to use other derivatives for years. But it will be massive for the CFD industry.

WHat do you guys reckon - is this a good thing?

CitySlicker

 

[Julia]

I dunno if people have heard yet, but the ATO has made a ruling that super funds can now trade CFDs.

I don't reckon it's that big a deal, given that they've been able to use other derivatives for years. But it will be massive for the CFD industry.

WHat do you guys reckon - is this a good thing?

CitySlicker

Do you have a link to that ruling, please?

 

[mft06]

Hey Cityslicker
I think its a good idea, have been waiting so i can trade with my super, would be intrested to see the ruling to see wot type of safe gurds they are thinking about, do you have the link?

 

[CitySlicker]

Hey Cityslicker
I think its a good idea, have been waiting so i can trade with my super, would be intrested to see the ruling to see wot type of safe gurds they are thinking about, do you have the link?

Sure do:

http://law.ato.gov.au/atolaw/view.htm?docid=AID/AID200756/00001

Cheers,
CitySlicker

 

[deftfear]

It's a ridiculous idea I think, most people who have a smsf don't have a clue what they are doing with their money and letting them loose with CFD's is a recipe for disaster. I'm sure there are a few who will benefit, but the number of people who would lose far outweighs this number.

 

[Julia]

It's a ridiculous idea I think, most people who have a smsf don't have a clue what they are doing with their money and letting them loose with CFD's is a recipe for disaster. I'm sure there are a few who will benefit, but the number of people who would lose far outweighs this number.

Interesting comment. On what basis do you say "most people who have a SMSF don't have a clue what they are doing with their money"???

 

[deftfear]

Interesting comment. On what basis do you say "most people who have a SMSF don't have a clue what they are doing with their money"???

From what I see at work. I know the rules are complicated but nearly every fund that I see is breaking the rules in one way or another. Taking money out for personal reasons, borrowing money, not keeping accurate records etc. I know this is a generalised statement and SMSF's are great for some people, and the ones that use SMSF's well will be the ones to benefit from being able to use cfd's, but I think others will end up losing their retirement money by "gambling" on cfd's. I've gotta say, it appears alot of accountants don't understand the smsf rules either.

Don't get me wrong, I have seen some smsf funds grow massively due to good management and they are fantastic for people who will follow the rules and keep good records.

 

[Prospector]

Have to agree with Julia on this one. Why assume that people who run their own SMSF dont know what they are doing.

The responsibilities of managing your own SMSF are onerous and there is no way people are going to experiment with CFD's just because they are now available.

And for what its worth, our SMSF has never broken the rules 'in any way'.
The rules arent that complicated if you abide by the few basic premises and they really arent rocket science.

 

[deftfear]

Maybe I am a bit cynical at the moment, I have just come across a batch of smsf's that are in breach of plenty of rules and the previous accountant wasn't completing the accounts correctly either making my life a pain in the.... Like I said, smsf's are great for the people who take the time to run it properly like you do Prospector, but unfortunately from my experience, you are in the minority.

 

[reece55]

Guys
Just bare in mind that if you are investing in CFD's in your super fund, you will require a guaranteed stop loss account. This is because ATO ID 2007/57 prohibits the use of SMSF cash as collateral for the potential for a margin call. Whilst it adds to your transaction costs (IG will take an extra 0.2 % for shares, 2 pips on FX majors, etc.), its better than being in beach of the SIS rules.

For those interested, the ruling is here:

http://law.ato.gov.au/atolaw/view.htm?docid=AID/AID200757/00001

Remember that the CFD provider will not care about these rules - so you must ensure you select this option. Plus, I note that my CFD account with IG for my super fund will actual allow me to place a margin call trade, so you really have to be careful here not to breach the SIS rules.

Whilst I agree that for most, this will be a quick way of losing a lot of money, it is the only way I know that a super fund can trade on the short side of the market. Provided you are sensible with your leverage, it can provide additional opportunities that would otherwise not be available to you.

Cheers
Reece

 

[Flathead Flick]

Whilst I agree that for most, this will be a quick way of losing a lot of money, it is the only way I know that a super fund can trade on the short side of the market. Provided you are sensible with your leverage, it can provide additional opportunities that would otherwise not be available to you.

Cheers
Reece

You're right Reece - both about people losing cash and it being a great way to get on the short side of the market.

But to precent too many problems for people using CFDs in SMSFs, I really think the onus should be put back onto the CFD providers to ensure that they provide adequate education for those who are going to use this option. One person losing their their super by trrading CFDs will hit TT or ACA in no time, and I'm pretty sure that won't be of too much benefit to that provider, or CFDs in general.

FF

 

[Prospector]

Maybe I am a bit cynical at the moment, I have just come across a batch of smsf's that are in breach of plenty of rules and the previous accountant wasn't completing the accounts correctly either making my life a pain in the.... Like I said, smsf's are great for the people who take the time to run it properly like you do Prospector, but unfortunately from my experience, you are in the minority.

I think that's quite scary, mainly because the ATO will crack down on SMSF's if they think they are dodgy and make it difficult for the rest of us who are genuinely trying to get the money together for retirement. I guess it is tempting to dip into it when you are trying to pay all the bills of today and having that money staring at you, which is meant for 'tomorrow'.

I wont be getting into the CFD area, I just dont understand it.

 

[yonnie]

Guys
Just bare in mind that if you are investing in CFD's in your super fund, you will require a guaranteed stop loss account. This is because ATO ID 2007/57 prohibits the use of SMSF cash as collateral for the potential for a margin call. Whilst it adds to your transaction costs (IG will take an extra 0.2 % for shares, 2 pips on FX majors, etc.), its better than being in beach of the SIS rules.

For those interested, the ruling is here:

http://law.ato.gov.au/atolaw/view.h...o prevent any disinformation. good trading:)

 

[auric]

looking at the cfd ruling that smsf can trade cfd's
if they deposit cash
it would seem that you could trade futures under the same conditions, ???

http://www.eurekareport.com.au/iis/iis.nsf/ak/c8NWVR?opendocument

if so this would be a cheaper way to hedge your fund than using cfd's
and would also be better going through a recognised and regulated exchange
opinions please
cheers ken

 

[yonnie]

looking at the cfd ruling that smsf can trade cfd's
if they deposit cash
it would seem that you could trade futures under the same conditions, ???

http://www.eurekareport.com.au/iis/iis.nsf/ak/c8NWVR?opendocument

if so this would be a cheaper way to hedge your fund than using cfd's
and would also be better going through a recognised and regulated exchange
opinions please
cheers ken

yes ken, futures, options, warrants are all possible in a SMSF.

I fully agree with you that futures would be way cheaper than using cfd`s to hedge your exposure in the fund.
Interest charges from CFD providers will kill you for a long term hedge.
You always pay interest over the full value of your position,
even if you cough up 50% margin and your position is 100% ahead. Your interest charge will then be about 36% pa.

I wouldn`t like to deposit my money with a cfd provider.
In a bankruptcy the money wouldn`t be insured and neither your cfd contracts. The underlying shares which are in the cfd provider`s name might have been sold to pay the bills before bankruptcy and you might end up with nothing.

I agree that it wouldn`t happen easily, but a broker went belly up in NZ a couple of years ago and remember Repco,
a billion dollar outfit in the States?

Its far safer to go with the likes of Macquarie, Comsec etc.
even if you have to pay a little more.

 

[auric]

yonnie
thanks confirmed what i think on cfd's
i would have thought the ATO would have been more
inclined to actually give the ruling for futures
instead of cfd's
definitly cheaper with spi index futures
would be good to have a forum on SMSF (administration costs, investment types and trading styles)?
as it is one of the fastest growing sectors
and hedging and going short will be needed
when the bull finally has a heart attack

 

[yonnie]

yonnie
thanks confirmed what i think on cfd's

Yeah thats right....I made some remarks elsewhere about CFD providers charging far too much interest, but some people just waved me aside and saying CFD`s were not for me. No, I like CFD`s with the opportunity of high leverage but not at all costs.

I`m thinking of joining up with Macquarie with their Prime account, where you can trade shares, cfd`s and margin loan trading all in the one account.

"i would have thought the ATO would have been more
inclined to actually give the ruling for futures
instead of cfd's"

Dont know what you mean exactly....are you saying that you cant trade futures in a SMSF?
other people on this forum say you can do that.


"definitly cheaper with spi index futures
would be good to have a forum on SMSF (administration costs, investment types and trading styles)?
as it is one of the fastest growing sectors
and hedging and going short will be needed
when the bull finally has a heart attack

"

well there are some threads about SMSF administration cost and you can use the search feature to look for them.
As to investment types and trading styles in a SMSF we`re all different.
I`m a full time share trader and just established a SMSF and will be short/medium term trading in that account and pay no tax on our profits