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Re: What do I report on income tax (trading) CFD's?

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Initiate

Views 21343

Replies 16

i.e. do I report only my profits or do I report my losses? is there capital gains tax or is it just revenue? if I lodge my return on paper which part of the forum do I fill out if I am conducting business activities stock trading under an abn? I just need general guide lines on what to do with a sole income from trading CFD's, thank you.

Also what business expenses can I expect to claim back on tax out of this list..

- Spreads
- Commisions
- Data subscription fees
- General brokerage fees
- Internet connection
- Laptop

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Most helpful response

ATO Certified Response

Devotee

Replies 14

Hi @Revan,

 

Welcome to our Community! @macfanboy has provided some really handy information to help explain how CFDs are treated (especially in terms of CGT).

 

Check out our view of the tax implications of trading in CFDs in Taxation Ruling TR 2005/15 Income tax: tax consequences of financial contracts for differences. If you are trading as a small business/sole trader, then you'll generally be able to claim costs associated with earning assessable income (including depreciation on assets, office expenses and losses). The link to Shareholding as investor or share trading as a business also outlines some of the kinds of deductions allowed for traders.

As @macfanboy stated, if you're a sole trader you'll report your income at item 15 Net income or loss from business.If this is the first time you'll complete this section in your tax return, it's also worth checking out our sections on income and deductions for business, our small business assist site and our tax basics for small business videos. You might also find it beneficial to talk with a registered tax professional - find one in your area by searching the Tax Practitioners Board register.

Hope that helps!

16 REPLIES 16
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Taxicorn

Replies 15

You are a sole trader and will record your income minus your expenses.

If this is a loss then it is carried forward.

If it is a gain then you will pay tax on the gain, how much depends on the amount of your gain.

 

There is no CGT as you are not an investor but a trader and it is veiwed as revenue.

 

It is recorded under item 15.

 

All running expenses have to be proportioned between work v personal.

 

Make sure that the ATO will veiw you as a trader:

https://www.ato.gov.au/General/Capital-gains-tax/Shares,-units-and-similar-investments/Shareholding-...

 

 

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Most helpful response

ATO Certified Response

Devotee

Replies 14

Hi @Revan,

 

Welcome to our Community! @macfanboy has provided some really handy information to help explain how CFDs are treated (especially in terms of CGT).

 

Check out our view of the tax implications of trading in CFDs in Taxation Ruling TR 2005/15 Income tax: tax consequences of financial contracts for differences. If you are trading as a small business/sole trader, then you'll generally be able to claim costs associated with earning assessable income (including depreciation on assets, office expenses and losses). The link to Shareholding as investor or share trading as a business also outlines some of the kinds of deductions allowed for traders.

As @macfanboy stated, if you're a sole trader you'll report your income at item 15 Net income or loss from business.If this is the first time you'll complete this section in your tax return, it's also worth checking out our sections on income and deductions for business, our small business assist site and our tax basics for small business videos. You might also find it beneficial to talk with a registered tax professional - find one in your area by searching the Tax Practitioners Board register.

Hope that helps!

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Initiate

Replies 5

Hello, thanks this has cleared up alot, still a few things..

- I am still unaware if brokerage fees and commisions are tax deductable, specifically the "spread".

What if I make money from trading CFDs yet the tax office doesn't regonize myself as a business/trader? do I need some sort of "approval" before I lodge my tax return? as the stock brokers don't require any sort of ABN number etc, you just sign up and trade.

- Can you please provide me a link to the printable PDF paper tax form I will lodge my return on, is it the form for individuals or for businesses?


Thank you

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Taxicorn

Replies 4

You are either a Share Trader (business) or an Investor.

 

An investor will buy some shares maybe a few times a year and either hold onto them or sell them after a while.

 

A Share Trader will buy and sell lots of shares numerous times a year, because of this the ATO will recognise you as a Share Trader.

 

A share trader is a person who carries out business activities for the purpose of earning income from buying and selling shares. For a share trader:

  • receipts from the sale of shares constitute assessable income
  • purchased shares are regarded as trading stock
  • costs incurred in buying or selling shares – including the cost of the shares – are an allowable deduction in the year in which they are incurred
  • dividends and other similar receipts are included in assessable income.

There is only one tax return form that you fill in, this covers both business and personal.

 

Deductions can only reduce the amount of tax that you have to pay, they do not provide $ for $ rebate.

 

I would strongly suggest that you see a Tax Accountant initially so that you are aware of all of your obligations.

 

The fee will be a tax deduction in the following year.

 

 " I am still unaware if brokerage fees and commisions are tax deductable, specifically the "spread"."

 

If you paid brokerage fees and commisions to aquire the shares then yes they are deductable.

The "spread" is the difference between buying cost and selling cost so by "spread" do you mean how much you earned/lossed?

 

 

 

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Community Support

Replies 3

Hi @Revan,

 

Thanks for getting in touch!

 

As @macfanboy has explained if you're a trader you generally entitled to claim brokerage fees and commissions you've paid in order to conduct trades. Does this help to answer your question about claiming 'the spread'?

 

The individual tax return for 2017-18 won't be available until 1 July 2018, however you must complete the return online as you'll need to complete item 15 this financial year. You can find more information about if you need the individual tax return instructions supplement section here.

 

If you'd like written confirmation on your status as a share trader, you can write to us to request a private ruling. Private rulings are a free service we provide and we aim to respond within 28days of receiving your request.

 

Thanks.

 

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Initiate

Replies 2

Hello, yes I would be interested in recieving a private ruling stating that I am a trader, how do I proceed?

I also would like to view the tax return itself but since it's online and unreleased I don't feel I can accses it, the individual tax supplement form just says to do it online, perhaps there is a form from a few years back that I can practice answering the questions on in order to prepare?

Thank you.

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Taxicorn

Replies 0

You should be able to partially complete one and view/print/save it out without actually committing it to be lodged.

 

If you are concerned and interested on how it is filled out then go and pay a tax agent to complete it for you, ask them lots and lots of questions, ask for a FULL copy of the return and then ask more questions.

 

The cost that you pay will be deductable next year and then if confident do it yourself.

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Community Support

Replies 0

Hi @Revan,

 

You can apply for a private ruling by:

  1. Download the appropriate private ruling application form.
  2. Complete the private ruling application form and attach all the required information.
  3. Lodge your application.

You can find this information and more about applying for a private ruling on our website here. You can also view the 2016 Supplementary tax return and the supplementary tax return instructions on our website.

 

Thanks.

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I'm new

Replies 3

Thanks Amanda

 

I trade Share Indices, Commodities (mainly Gold) and occasionally Forex on an Australian licenced trading platform.  Even though I do not trade CFDs as such (although I could on the same platform should I choose to) it is fairly clear from TR2005/15 (and other publications, community forums etc. I have seen on this topic) that my trading patterns qualify as business activity.  I will therefore need to declare the outcome of my trading activity on my tax returns (either as a profit or a loss).

 

The follow-up question I have in this area is:  At what point do my profits or losses become assessable?  The particular application I have in mind is profits left within my trading platform account (i.e. before I choose to withdraw them and therefore become banked).

 

As is often the case this question is best illustrated by example.  For the purposes of this question, you can assume that all the trading activity described below takes place within the one financial year (although if any of these activities straddling financial years has any effect on your answer, please feel free to describe these differences if it isn’t too complicated to do so).

 

Activity 1:  Deposit $10,000 into trading platform

Activity 2:  Trade for a length of time (without making any further deposits, or any withdrawals either) and make $8,000 on these trades.  Trading account balance is now $18,000

Activity 3:  Withdraw $5,000 into bank account, leaving the trading account balance at $13,000

 

If possible please advise on how the above scenario should be recorded on my tax return (and feel free to include any caveats that may also apply, especially if they relate to commonplace activity for platform traders).

 

Thanks for your assistance with this!