Being a relatively new trading instrument there was no taxation ruling on CFDs when they arrived in Australia in 2002. Applying existing legislation to Contracts for Difference made them tax free as the closest link was to gambling. Some might assume that CFDs and gambling are closely related the Australian Tax Office did not agree. They fast tracked legislation that addressed tax on 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.
Profit From CFDs is Income
Net profit or loss is considered as taxable income. Simply add up your profits and subtract your losses to get your taxable income. So any net gain made adds to taxable income while losses reduce taxable income.
Maximise Your Tax Deductions
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 Does Not Apply to 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.
Tax On CFDs In Other Countries
There is no substitute for professional tax advice from an advisor in your country. Tax laws are different around the world and it is beyond the scope of this article to cover every country. Keep in mind that in New Zealand you do not want to be considered a trader by the IRD as this could affect all of your investments. Use a separate company or entity to separate out your CFD trading. Spread betting in the UK is tax exempt, but be aware you do pay a wider spread to participate in this.
CFD Taxation, The Final Word
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.
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.
Profit From CFDs is Income
Net profit or loss is considered as taxable income. Simply add up your profits and subtract your losses to get your taxable income. So any net gain made adds to taxable income while losses reduce taxable income.
Maximise Your Tax Deductions
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 Does Not Apply to 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.
Tax On CFDs In Other Countries
There is no substitute for professional tax advice from an advisor in your country. Tax laws are different around the world and it is beyond the scope of this article to cover every country. Keep in mind that in New Zealand you do not want to be considered a trader by the IRD as this could affect all of your investments. Use a separate company or entity to separate out your CFD trading. Spread betting in the UK is tax exempt, but be aware you do pay a wider spread to participate in this.
CFD Taxation, The Final Word
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.
About the Author:
Jeff Cartridge is the author of Supercharge Your Trading with CFDs and created the website LearnCFDs.com 441% in 6 weeks Trading CFDs
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