Private ruling: Contracts for difference
Date of advice: 25 September 2019
Published: November 2019
Ruling period: Year ended 30 June 2018 | Year ended 30 June 2019
Date scheme commenced: 1 July 2017

Ruling: Q1: 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)? | A1: Yes | Q2: Are the losses you made from trading CFDs deductible under section 25-40 of the ITAA 1997? | A2: 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.

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