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CFD taxation on gains and losses

Newbie

Replies 1

Hi @Skyblues did you find out where this to be added in tax online?

ATO Community Support

Replies 0

Hi @ihaveaquestion,

 

We have answered this on our forum previously, you can view our response here.

 

If you have further questions please post them here.

Initiate

Replies 2

If you are ForEx/CFD trading as for profit making as a side gig (not like carrying on a business) add up all your profits and declare this total profit (not net profit) from Forex/CFD trading at "Other Income" sections (more info at  https://www.ato.gov.au/Individuals/myTax/2021/In-detail/Other-income/?=redirected_mytax21OtherIncome ). Even though you made an overall yearly net loss, you should be decalring your intermittent profits in this section becsuse these total profits need to be added to your assesseble income to be factored into your "Income Test" to calculate your different liabilities like medicare levy surchagre, HECS debt repayment and so on...

 

AND add up all your lossess (not net loss) from Forex/CFD trading in level D15 (more info at https://www.ato.gov.au/Individuals/Tax-return/2019/Supplementary-tax-return/Deduction-questions-D11-...) So ultimately you are paying tax on your net taxable profit/income.

 

If Forex/CFD trading is your business then fill in business income and expenses sections in details. Only exception is you wouldnt be able to offset the Forex/CFD losses against your other incomes. Losses must be carried forward until you are eligible to offset it against similar income in later years just like other business income and losses treatments (more info at https://www.ato.gov.au/Business/Non-commercial-losses/)

 

CGT doesnt apply to Forex/CFD trading profit/losses because you never owned the underliying asset to begin with.

 

And there is no GSTs in Forex/CFD trading. 

 

Hope this helps and correct me if I am wrong or missed anything here!

Initiate

Replies 1

Corrections: Losses must be carried forward until you are eligible to offset it against other income (not similar income) in later years just like other business income and loss treatments (more info at https://www.ato.gov.au/Business/Non-commercial-losses/) if CFD trading is your business.

ATO Community Support

Replies 0

Hi @iqcron

 

This looks good and will help many members of our Community complete their tax returns.

 

Thank you Smiley Happy

Former Community Support

Replies 2

Hi @HariOm,

 

Thanks for getting in touch!

 

Generally speaking, profits and losses arising from trading CFDs are treated as income and deductible expenses as per TR 2005/15.


You can claim a deduction for your CFD loss against your other income. The only exception to this would be if you're in business of CFD trading, as you would also need to consider the application of the non-commercial loss rules to you.

 

I hope this helps, JodieM

 

 

 

 

 

Newbie

Replies 1

Hi JodieM,

If the non-commercial loss applied to me, where can I report this?

I am using MyTax to lodge the tax return via MyGov.

Do I report these under sole trader? but I don't have ABN to trade CFDs.

The sole trader section also asking questions like what is my main business activity description, CFDs trading is not in the list and not let me continue. Other questions like trade debtors/creditors, which are not applicable to me.

Thank you in advance.

Former Community Support

Replies 0

Hi @CHon,

 

Thanks for your question!  To claim a loss you must have commenced CFD trading as a business activity. You can't claim a loss for a business that is little more than a hobby or lifestyle choice. From the information you have provided, it’s not clear if you’re actually in business. It is important to understand the differences between a hobby and a business for tax and other purposes. This video will help you to work out whether you are in business.

 

Taxation Ruling TR 2005/15 also applies to your situation; please refer to paragraph 15 and 41 within the Income tax: tax consequences of financial contracts for differences ruling.

 

15. A gain or loss from a financial contract for differences entered into for the purpose of recreation by gambling will not be assessable income under section 6-5 or section 15-15 of the ITAA 1997 or deductible under section 8-1 or section 25-40 of the ITAA 1997. A capital gain or capital loss from a financial contract for differences entered into for the purpose of recreation by gambling will be disregarded under paragraph 118-37(1)(c) of the ITAA 1997.

 

41. Having regard to the features of a financial contract for differences outlined at paragraphs 6 to 8 the Commissioner considers that a financial contract for differences would be entered into with either a profit making purpose or a recreational purpose, so that the gain or loss is either on revenue account or properly characterised as the product of gambling. Although it is not possible to exclude (as a matter of law) the possibility that a financial contract for differences will be entered into for some purpose that is neither profit-making nor recreational, it is (as a matter of fact) considered to be exceedingly unlikely.

 

I hope this helps you, JodieM