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Taxes on Trading using Forex, CFD, etc.

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Newbie

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I’d like to enquire about taxes on trading using Forex, CFD, etc..

 

1) Revenue Account

I’ve read that trading income (profits from trading) is to be put in “Revenue Account”. If I have a day job and earn a salary, should I put the trading income in the same section where I put my salary in? So it’s like my income from my day job as one line, and then my income from trading as another line?

 

2) Tax Deductions

Can I use the following 4 items as tax deductions against my trading profits?

a) Trading Losses

b) Fees (fees or commissions charged by the broker for placing trades)

c) Interest (interest the broker charges if the trade is still open overnight)

d) Spread (which is the difference between buy price and sell price, and also it is used by some brokers as their means to charge their customers)

 

Also, as I haven’t done it before, which section should I put the deductions in?

 

And, can those tax deductions be used only in the current year, or can they be deferred? E.g. my trading losses/fees/interest/spread are greater than my profits this year, can the remaining part of the trading losses/fees/interest/spread be deferred until I make a profit?

 

If only trading losses can be deferred, can I put fees/interest/spread and maybe part of trading losses as tax deductions, and then defer the remaining part of the trading losses until I make a profit?

 

3) Record Keeping

How long am I supposed to keep my trading records?

What information should be included in the records?

 

Thank you in advance!

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ATO Certified Response

Devotee

Replies 0

1. Revenue Account 

means you are in the business of share trading. Income goes into the income section fo the business schedule.

 

2. 

a) Trading Losses

Yes.

b) Fees (fees or commissions charged by the broker for placing trades)

Yes

c) Interest (interest the broker charges if the trade is still open overnight)

Yes

d) Spread (which is the difference between buy price and sell price, and also it is used by some brokers as their means to charge their customers)

No.

 

Report these in the Business Schedule - similar to (1)

Losses can be carried forward.

Note the non-commercial business loss rules.

 

3) Record Keeping

ATO says generally 5 years (read this as 5 years from the date you dispose of the asset and record a gain or loss).

I personally recommend keeping these forever in the event of a dispute. Also doesn't hurt since most of these records should be electronic.

If FX applies - you need to record all the FX rates and apply the rules correctly.

 

Separately it is generally difficult to be in the business of a share trader and working a "day job". It is more likle than not that you do not qualify. You will need to have a reasonably arguable position should the ATO come back and determine that you have held the assets on capital account. 

 

Also you should be aware that assets held on revenue account mean you are not entitled to the 50% CGT discount.

 

 

1 REPLY 1
Highlighted

Most helpful response

ATO Certified Response

Devotee

Replies 0

1. Revenue Account 

means you are in the business of share trading. Income goes into the income section fo the business schedule.

 

2. 

a) Trading Losses

Yes.

b) Fees (fees or commissions charged by the broker for placing trades)

Yes

c) Interest (interest the broker charges if the trade is still open overnight)

Yes

d) Spread (which is the difference between buy price and sell price, and also it is used by some brokers as their means to charge their customers)

No.

 

Report these in the Business Schedule - similar to (1)

Losses can be carried forward.

Note the non-commercial business loss rules.

 

3) Record Keeping

ATO says generally 5 years (read this as 5 years from the date you dispose of the asset and record a gain or loss).

I personally recommend keeping these forever in the event of a dispute. Also doesn't hurt since most of these records should be electronic.

If FX applies - you need to record all the FX rates and apply the rules correctly.

 

Separately it is generally difficult to be in the business of a share trader and working a "day job". It is more likle than not that you do not qualify. You will need to have a reasonably arguable position should the ATO come back and determine that you have held the assets on capital account. 

 

Also you should be aware that assets held on revenue account mean you are not entitled to the 50% CGT discount.