Contracts for Difference (CFDs) and Tax

The Australian Tax Office (ATO) was not prepared for the launch of CFD Trading in Australia and had no specific legislation addressing the taxation of CFDs. Initially any gain was treated in a similar way to gambling, but it soon became obvious that the ATO did not see CFDs the same way as gambling. Legislation was quickly drafted to address the taxation of CFDs.

Get Professional Advice

It is important that you consult your own accountant or tax adviser when it comes to tax time. Everyone’s financial situation is unique and the general guidelines here may not address all aspects of your tax situation. This is a guide to the interpretation of legislation regarding CFDs in Australia.

Income from CFD Trading

Any profit made when trading CFDs is treated as taxable income, and any losses made reduce taxable income. So the income for tax purposes is the net income calculated by adding up all your profits and taking away all your losses.

Deduct Your CFD Related Expenses

Any expenses associated with trading CFDs can be tax deductible. This includes costs like internet fees, any interest, brokerage or trading platform charges. These can be claimed to reduce your taxable income.

Capital Gains Tax and CFDs

While it would be highly unusual for a CFD trader to hold a position for 12 months or more, capital gains tax discounts do not apply to Contracts for Difference (CFDs). Franking credits also do not apply to dividends received while holding CFDs and no tax benefit is available for franking credits.

Final Word On CFDs and Tax

While it is vital for you to know your taxable situation this is not the reason to trade CFDs. It is not a wise investment decision to lose $1 to save 30 cents.

Source: Jeff Cartridge

Related Posts:

1. Day Trading Profit Secrets – CFDs Contracts For Difference
2. Profit Using Contracts For Difference
3. Stock Vs CFDs
4. What’s all this CFD HYPE : CFDs Explained
5. Investing vs.Trading What’s The Difference?
6. CFDs Versus Stocks And The Winner Is!
7. Do CFDs Suck?