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Edited version of private advice
Authorisation Number: 1051657665667
Date of advice: 21 April 2020
Ruling
Subject: Trading in contracts for difference
Question 1
Does your Contracts for difference (CFD) trading activity amount to the carrying on of a business?
Answer
No.
You do not meet the relevant factors contained in Taxation Ruling TR 97/11. Further information about carrying on a business can be found by searching 'QC 31733' on ato.gov.au
Question 2
Are the gains from your CFD trading activity assessable income, and are the losses from your CFD trading activity deductible?
Answer
Yes
The principles set out in Taxation Ruling TR 2005/15 Income tax: tax consequences of financial contracts for differences (TR 2005/15) have been applied, which provides the Commissioner's view on the income tax consequences of entering into financial CFD's.
In your case, as your CFD trading activities were not being carried on as a business, but rather as a profit making undertaking, the gains from the activity are assessable income, and the losses from the activity are deductible. In addition, the non-commercial loss rules will have no application.
This ruling applies for the following periods:
Year ended 30 June 2019
Year ending 30 June 2020
The scheme commenced on:
1 July 2018
Relevant facts and circumstances
You transferred funds to an internet based trading platform.
From early to mid- 2019 you transferred money on several occasions, with the total sum being of a significant amount. The transfers were of various amounts.
Since mid-2019 you also transferred money in various amounts on several occasions, with the total sum also being of a significant amount.
The trading platform completed all of the trades on your behalf, and they completed a significant number of trades in total. Due to this you did not spend any time trading yourself, and all you were required to do was to transfer the funds to the CFD trading account when required.
The trading platform purchased and sold on the X/CFD markets.
You lost all of the funds you transferred to Internet based trading platform.
You did not draw up any business plan for your CFD trading activities.
You have full-time employment which is unrelated to CFD trading and finance in general.
You did not have a trading methodology as trading platform completed all of the trades on your behalf.
Whilst you had some experience in CFD trading you did not have a sound knowledge on the topic.
You did not complete any CFD related courses, and your base level knowledge on the subject was sourced from completing some internet-based research.
You did not set up a home office to be used for your CFD activities.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 15-15.
Income Tax Assessment Act 1997 Section 25-40.
Income Tax Assessment Act 1997 Section 995-1.