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Edited version of private advice
Authorisation Number: 1051582049937
Date of advice: 25 September 2019
Ruling
Subject: Contracts for difference
Question 1
Are the gains you made from trading contracts for differences (CFDs) included in your assessable income under section 15-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes
Question 2
Are the losses you made from trading CFDs deductible under section 25-40 of the ITAA 1997?
Answer
Yes
Taxation Ruling TR 2005/15 deals with the tax consequences of financial CFDs. It explains that gains from a financial CFD will be assessable income if the CFD transaction is entered into as an ordinary incident of carrying on a business, or the profit was obtained in a business operation or commercial transaction for the purpose of profit making. For those who have entered into a CFD as a result of carrying on or carrying out a profit-making undertaking or scheme the gains made will also be assessable.
Likewise, losses from a financial CFD will be deductible if the CFD transaction is entered into as an ordinary incident of carrying on a business, or the profit was obtained in a business operation or commercial transaction for the purpose of profit making. In addition, losses from CFD transactions are deductible where the gain would have been assessable as a result of carrying on or carrying out a profit-making undertaking or scheme.
After weighing up the facts you are not carrying on a business of CFD trading. However, your CFD activities were undertaken with a view to making a profit, therefore your gains from trading CFDs are assessable and losses are deductible.
This ruling applies for the following period:
Year ended 30 June 2018
Year ended 30 June 2019
The scheme commences on:
1 July 2017
Relevant facts and circumstances
You traded for a short time on a CFDs and Forex Trading platform.
You traded regularly and were organised.
You intended to make a profit on the margin movements on the day-to-day movements in the prices of the securities.
You ultimately made a loss over the period and decided to cease trading.
You conducted less than 50 trades over the period.
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 15-15
Income Tax Assessment Act 1997 section 25-40
Income Tax Assessment Act 1997 section 995-1