Tax on Contracts for Difference
When Contracts for Difference (CFDs) were first introduced to Australia, there was no tax payable on income derived from CFD trading because they were treated as gambling. Even if a lot of people say that there is only a slight difference between the CFDs and gambling the ATO still insists to disagree. They very quickly implemented a policy that targeted Contracts for Difference before anybody could file for tax return.
Make It a Point to Consult a Tax Advisor at All Times
If you are considering the implications of CFD tax for your personal situation, then you must make it a point to contact your tax adviser. Your specific situation may be unique and not covered by the guidelines below. The outline that follows is a general guide to the treatment of Contracts for Difference (CFDs) for tax purposes.
CFD Profit Is Considered As Income
Any profit that you made from trading CFDs is treated as income while any losses incurred reduces the taxabale income. So income for taxation purposes is calculated by summing up all the profits and deducting all the losses.
Deducting the Contracts for Difference Related Expenses
As with any business, whether you are a company or not, business expenses associated with CFD trading, such as platform charges, interest charges and internet access, may be deductible, reducing your taxable income.
Capital Gains Tax Does Not Apply to CFDs
While it is not common for a CFD trader to hold a position for 12 months or more, CFDs are not often applied with capital gains tax discounts. Franking credits do not apply to dividends received while holding CFDs and no tax benefit is available for franking credits.
CFD Tax Applied Outside of Australia
You can watch out for a few things outside of Australia and again tax advice from a local accountant is significant. In New Zealand, it pays to trade CFDs through a separate entity for you not to be classified as a trader by the IRD which could have an impact on your investments. In the UK spread betting still remains to be non taxable but the penalty for a trader is a wide spread paid on every transaction.
The Last Word On Tax on CFDs
As with any investment it is important to know your tax obligations, though these are not the first priority. Remember losing $1 to save 30 cents is a stupid investment decision.
Make It a Point to Consult a Tax Advisor at All Times
If you are considering the implications of CFD tax for your personal situation, then you must make it a point to contact your tax adviser. Your specific situation may be unique and not covered by the guidelines below. The outline that follows is a general guide to the treatment of Contracts for Difference (CFDs) for tax purposes.
CFD Profit Is Considered As Income
Any profit that you made from trading CFDs is treated as income while any losses incurred reduces the taxabale income. So income for taxation purposes is calculated by summing up all the profits and deducting all the losses.
Deducting the Contracts for Difference Related Expenses
As with any business, whether you are a company or not, business expenses associated with CFD trading, such as platform charges, interest charges and internet access, may be deductible, reducing your taxable income.
Capital Gains Tax Does Not Apply to CFDs
While it is not common for a CFD trader to hold a position for 12 months or more, CFDs are not often applied with capital gains tax discounts. Franking credits do not apply to dividends received while holding CFDs and no tax benefit is available for franking credits.
CFD Tax Applied Outside of Australia
You can watch out for a few things outside of Australia and again tax advice from a local accountant is significant. In New Zealand, it pays to trade CFDs through a separate entity for you not to be classified as a trader by the IRD which could have an impact on your investments. In the UK spread betting still remains to be non taxable but the penalty for a trader is a wide spread paid on every transaction.
The Last Word On Tax on CFDs
As with any investment it is important to know your tax obligations, though these are not the first priority. Remember losing $1 to save 30 cents is a stupid investment decision.