Edited version of private advice

Authorisation Number: 1051957612726

Date of advice: 10 March 2022

Ruling

Subject: Am I in business - contracts for difference trading

Question 1

Are the gains or losses made from your Contracts for difference (CFD) trading treated as profits or losses made from carrying on a business of CFD trading, assessed under sections 6-5 and 8-1 of the Income Tax Assessment Act (ITAA) 1997?

Answer

Yes. The determination of whether or not an activity amounts to a business being carried on is a result of the weight and influence of the facts in that situation. After applying the facts of your situation to the relevant indicators as listed in Taxation Ruling TR 97/11, Income tax: am I carrying on a business of primary production? (TR 97/11) it is considered that you were carrying on a business of trading in CFD's. Further information about carrying on a business can be found by searching 'QC 31733' on ato.gov.au

Question 2

If the CFD trading activity is considered a business, then will section 35-30 of ITAA 1997 apply to allow the offset of these losses against other assessable income?

Answer

Yes. If you meet the income requirement and pass any one or more of the four tests, you can offset your business losses against your other income in the relevant year. Further information on non-commercial losses and the four tests can be found by searching QC 33774 and QC 33771 on ato.gov.au.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are a full-time employee who satisfies the less than $250,000 income requirement for the relevant income years.

You began trading in CFD's in 20XX.

You began CFD trading to access global assets at a lower cost than buying the asset outright, ease of executions and the ability to go long or short.

Your trading activities are completed online.

You spend on average 20 hours per week on CFD trading activity.

You use two types of strategies when you are entering and closing a trade.

You undertake strategy and planning sessions with an Account Manager at CMC on a weekly basis.

You have a business plan.

You undertake Continuous Professional Development (CPD) webinars on-line.

You have obtained a CMC Pro certificate due to your experience in trading and passing a knowledge test which now recognises you as a sophisticated investor.

You receive on average 10 alerts per day for trading related events and news.

You carry out research through various providers such as 'While you were sleeping', 'Ord Minnett' and 'Australia Morning Focus'.

You spend on average 7 hours per week on researching.

You conducted approximately XXX transactions in the 20XX financial year, XXX transactions in the 20XX financial year and XXX transactions in the 20XX financial year.

Your assessable income from the trading activity was more than $XXXX in the relevant years.

You incurred a loss as at 30 June 20XX, 30 June 20XX and a profit as at 30 June 20XX.

You entered into trading CFD's with a view to make a profit.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 section 35-30

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