So I need to fill in my ETax this last FY and yeah I made a loss of some 20K from CFD daytrading. I consider this to be a 'profit-making undertaking' under s15-15 of ITAA 1997 so this can be claimed as a deduction against assessable income. I dont see it as recreational gambling as I was trading fulltime and conducting frequent trades of considerable size. So I was wondering what others who have made CFD losses done in their tax return? Do you fill in fill in section 'D15 - Other deductions' under Expenses given my reasons above are all valid? Or do you only treat these as a CGT event and use it to offset future capital gains?
Tax treatment of CFD losses
- Thread starter dojara
- Start date
Re: Tax treatment on CFD losses
Mate, thanks for this post.. I was filling in my tax returns and was just wondering which section in e-tax do you put this deduction ?? Thanks in advance
Mate, thanks for this post.. I was filling in my tax returns and was just wondering which section in e-tax do you put this deduction ?? Thanks in advance
Re: Tax treatment on CFD losses
Mate, I actually thought that you could only use your losses to offset future share capital gains, unless you can show that your primary income or you if you can classify yourself as a trader. Was this your primary source of income?? If so, go for your life.
Mate, I actually thought that you could only use your losses to offset future share capital gains, unless you can show that your primary income or you if you can classify yourself as a trader. Was this your primary source of income?? If so, go for your life.
Krusty the Klown
Embittered Komedy Legend
- Joined
- 27 May 2009
- Posts
- 555
- Reactions
- 0
Re: Tax treatment on CFD losses
Unless you declare your trading profits as "ordinary" income, then all profits and losses from CFD trading should be treated as "capital" gains and losses.
So your losses can be used in future years to offset any capital gains.
For you to treat your profits as "ordinary" income you must be able to demonstrate that you are "effectively" carrying on a business - ie have a business plan, have very regular trading activity, a place to carry out the business activity, keep meticulous records of activity etc. The same way any other business does.
Most people would treat these activities using the capital gains system.
Unless you declare your trading profits as "ordinary" income, then all profits and losses from CFD trading should be treated as "capital" gains and losses.
So your losses can be used in future years to offset any capital gains.
For you to treat your profits as "ordinary" income you must be able to demonstrate that you are "effectively" carrying on a business - ie have a business plan, have very regular trading activity, a place to carry out the business activity, keep meticulous records of activity etc. The same way any other business does.
Most people would treat these activities using the capital gains system.
- Joined
- 25 September 2007
- Posts
- 1,712
- Reactions
- 13
Re: Tax treatment on CFD losses
http://www.thebull.com.au/articles_detail.php?id=121
this article gives some pointers, no absolute clarity though.
There is only one way to be sure, and that is to apply for an ATO "private ruling"
You could also scope out an accountant that has experience with clients who trade CFDs
http://www.thebull.com.au/articles_detail.php?id=121
this article gives some pointers, no absolute clarity though.
There is only one way to be sure, and that is to apply for an ATO "private ruling"
You could also scope out an accountant that has experience with clients who trade CFDs
Re: Tax treatment on CFD losses
Yeh totally correct, however I think that whenever you make a capital loss, the capital loss can only offset future capital gains in the same CGT area ie. capital losses in shares cannot be used to offset a capital gain on the sale of an investment property.
Yeh totally correct, however I think that whenever you make a capital loss, the capital loss can only offset future capital gains in the same CGT area ie. capital losses in shares cannot be used to offset a capital gain on the sale of an investment property.
Krusty the Klown
Embittered Komedy Legend
- Joined
- 27 May 2009
- Posts
- 555
- Reactions
- 0
Re: Tax treatment on CFD losses
rock, the nature of the capital item is irrelevant for CGT purposes. Any loss on disposal of a capital item can be offset against any other item.
For example lets say you speculated and bought and sold an antique and made a loss, you might not ever buy another antique so could not offset the loss.
Or a business buys, uses and sells a piece of machinery, say for packing fruit, at a loss - they may not ever buy one again. But they could offset it against the gain on disposal of a piece of land.
The ATO is only interested in net gains and losses.
The formula is - calculate your net capital gain or loss for this income year that you are completing your return for and then apply it to your accumulated losses from previous income years.
rock, the nature of the capital item is irrelevant for CGT purposes. Any loss on disposal of a capital item can be offset against any other item.
For example lets say you speculated and bought and sold an antique and made a loss, you might not ever buy another antique so could not offset the loss.
Or a business buys, uses and sells a piece of machinery, say for packing fruit, at a loss - they may not ever buy one again. But they could offset it against the gain on disposal of a piece of land.
The ATO is only interested in net gains and losses.
The formula is - calculate your net capital gain or loss for this income year that you are completing your return for and then apply it to your accumulated losses from previous income years.
Re: Tax treatment on CFD losses
Yeh mate you are definately correct, asked around the office today and everyone said exactly the same as you. Will be asking more then one person around the office next time, I should probably actually go tell him now, lucky we're both only grads.
Yeh mate you are definately correct, asked around the office today and everyone said exactly the same as you. Will be asking more then one person around the office next time, I should probably actually go tell him now, lucky we're both only grads.
Re: Tax treatment on CFD losses
Just to add onto this, the only capital loss that cannot be used to offset any other capital gains is a capital loss from collectables (jewellery, antiques, paintings etc.), a capital loss from collectables can only offset a future capital gain from another collectable asset/s
http://www.ato.gov.au/individuals/content.asp?doc=/content/36555.htm&page=1#P10_750
Just to add onto this, the only capital loss that cannot be used to offset any other capital gains is a capital loss from collectables (jewellery, antiques, paintings etc.), a capital loss from collectables can only offset a future capital gain from another collectable asset/s
http://www.ato.gov.au/individuals/content.asp?doc=/content/36555.htm&page=1#P10_750
Krusty the Klown
Embittered Komedy Legend
- Joined
- 27 May 2009
- Posts
- 555
- Reactions
- 0
Re: Tax treatment on CFD losses
Actually I used an antique as an example in my previous post to offset a loss against anything!!
Guess who's going to have to brush up on their theory!!!!!
Actually I used an antique as an example in my previous post to offset a loss against anything!!
Guess who's going to have to brush up on their theory!!!!!
Re: Tax treatment on CFD losses
Haha, only reason I remembered is cause I had a look at the ATO website:
Actually I used an antique as an example in my previous post to offset a loss against anything!!
Guess who's going to have to brush up on their theory!!!!!
Haha, only reason I remembered is cause I had a look at the ATO website
:Re: Tax treatment on CFD losses
Well I was told by the ATO that CFDs could be treated as business income/loss and simply filled out the business section with my overall loss as the income. All you need to be able to do is show that you had more than $20k of income (profits) for the year that you could claim the losses against.
Well I was told by the ATO that CFDs could be treated as business income/loss and simply filled out the business section with my overall loss as the income. All you need to be able to do is show that you had more than $20k of income (profits) for the year that you could claim the losses against.
- Joined
- 24 April 2009
- Posts
- 1,114
- Reactions
- 0
Re: Tax treatment on CFD losses
Do you need to be a registered business with an ABN and all that to declare share trading as ordinary income?
Do you need to be a registered business with an ABN and all that to declare share trading as ordinary income?
Re: Tax treatment on CFD losses
If you are a day trader, and that is your primary income, then yes the gain/loss on shares would be treated as ordinary income.
Most day traders would have an ABN and declare it that there business is trading shares. This would allow you to claim the GST incurred in trading and also to claim things such as brokerage as a deduction where other shareholders cannot (forms part of CGT costbase). However I don't know if it would be necessary to have an ABN, I'm guessing you probably would though
.
A little help From Whiskers post in another thread
If you are a day trader, and that is your primary income, then yes the gain/loss on shares would be treated as ordinary income.
Most day traders would have an ABN and declare it that there business is trading shares. This would allow you to claim the GST incurred in trading and also to claim things such as brokerage as a deduction where other shareholders cannot (forms part of CGT costbase). However I don't know if it would be necessary to have an ABN
, I'm guessing you probably would though.A little help From Whiskers post in another thread
Krusty the Klown
Embittered Komedy Legend
- Joined
- 27 May 2009
- Posts
- 555
- Reactions
- 0
Re: Tax treatment on CFD losses
I would be a bit more careful with this. You can do it this way if your situation warrants it, but it is always up to your individual situation. I would run your individual situation by a tax adviser before you do this as it may come back to haunt you.
Beware, just because someone works for the ATO does not qualify them to give individual tax advice, they are giving you general advice - the same as you can see on the ATO website.
You don't need an ABN to declare trading income as ordinary income, if you want to register for GST and claim GST input tax credits you will have to though. As the end user of most goods and services, you will bear the GST cost however, ie you have no customers to pass the GST on to.
Your business TFN is your ABN + 2 more digits.
I would be a bit more careful with this. You can do it this way if your situation warrants it, but it is always up to your individual situation. I would run your individual situation by a tax adviser before you do this as it may come back to haunt you.
Beware, just because someone works for the ATO does not qualify them to give individual tax advice, they are giving you general advice - the same as you can see on the ATO website.
You don't need an ABN to declare trading income as ordinary income, if you want to register for GST and claim GST input tax credits you will have to though. As the end user of most goods and services, you will bear the GST cost however, ie you have no customers to pass the GST on to.
Your business TFN is your ABN + 2 more digits.
Re: Tax treatment on CFD losses
Indeed, each situation is unique. However the process of trading CFDs whereby one is making on average a couple of trades a day with the aim of making a profit I would have thought qualifies as a business undertaking?
As far as records go, at least with IGMarkets, they provide a profit/loss statement that you can download for the financial year which contains all the information you need to prepare an overall figure for the years profit or loss.
E-Tax was pretty clear though that if it is a sideline business to your main source of income that it needs to pass one of four tests to qualify as assessable income(loss), one of which was at least $20k of profits (gross) for the financial year.
Just my situation though, and as Krusty says, check your own situation for yourself.
Indeed, each situation is unique. However the process of trading CFDs whereby one is making on average a couple of trades a day with the aim of making a profit I would have thought qualifies as a business undertaking?
As far as records go, at least with IGMarkets, they provide a profit/loss statement that you can download for the financial year which contains all the information you need to prepare an overall figure for the years profit or loss.
E-Tax was pretty clear though that if it is a sideline business to your main source of income that it needs to pass one of four tests to qualify as assessable income(loss), one of which was at least $20k of profits (gross) for the financial year.
Just my situation though, and as Krusty says, check your own situation for yourself.
Re: Tax treatment on CFD losses
$20K turnover, not profit. Comes under non-commercial loss rule. And the other 3 tests would be hard to qualify through day trading.
$20K turnover, not profit. Comes under non-commercial loss rule. And the other 3 tests would be hard to qualify through day trading.
- Joined
- 24 April 2009
- Posts
- 1,114
- Reactions
- 0
Re: Tax treatment on CFD losses
Well I earnt 17k from trades and 1k from interest and $800 from real work: I suppose trading is my primary source of income for the last year. So can I classify myself as a trader?
Well I earnt 17k from trades and 1k from interest and $800 from real work
: I suppose trading is my primary source of income for the last year. So can I classify myself as a trader?
- Joined
- 4 August 2008
- Posts
- 362
- Reactions
- 0
Re: Tax treatment on CFD losses
Let's take a step back here guys - People holding CFDs don't hold any assets. I.E No capital.
I thought this was the reason all differences are settled daily, not at the close of contract, so that it can be treated as income and expenditure, not as capital gains and losses.
Let's take a step back here guys - People holding CFDs don't hold any assets. I.E No capital.
I thought this was the reason all differences are settled daily, not at the close of contract, so that it can be treated as income and expenditure, not as capital gains and losses.
Krusty the Klown
Embittered Komedy Legend
- Joined
- 27 May 2009
- Posts
- 555
- Reactions
- 0
Re: Tax treatment on CFD losses
CFD's are marked to market daily, but they are not settled in cash until the contract is closed out.
The ATO has advised that CFD's have the same treatment as any other financial derivative, even though there is no ownership of the underlying physical asset, and therefore can be captured by the CGT provisions.
CFD's are marked to market daily, but they are not settled in cash until the contract is closed out.
The ATO has advised that CFD's have the same treatment as any other financial derivative, even though there is no ownership of the underlying physical asset, and therefore can be captured by the CGT provisions.