Private ruling: Income or capital
Date of advice: 7 August 2018
Published: October 2018
Ruling period: Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2016

Ruling: Q1: Are you in the business of trading contracts for difference? | A1: No | Q2: Are any gains or losses that you make capital in nature? | A2: Yes

Relevant facts and circumstances: You opened an account with the online broker to trade in contracts for differences. You deposited a significant amount of money into your account to conduct trading activities. You have an account manager who manages and conducts all of your trades. In your account you can see all of the withdrawals and deposits relating to the trading activities being undertaken by your account manager. You had the option to conduct trading activities if you wished, but the vast majority of your trading activities were undertaken by your account manager.

Relevant legislative provisions: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) | Section 6-10 of the ITAA 1997

Reasons for decision: Summary: In determining whether or not any gain or loss you make from trading contracts for differences it needs to be determined if your activities are an investment, the conducting of a business or the undertaking of a profit making scheme. The Commissioner’s view on the taxation consequences of trading in contracts for differences is contained within Taxation Ruling TR 2005/15 – Income tax: tax consequences of financial contracts for differences . This ruling provides that a gain or loss made by a taxpayer from trading in a financial contract for differences will be assessable as ordinary income under section 6-5 of the ITAA 1997 as the entering into of a contract for differences will constitute the conducting of business activities or will be undertaken for a profit making purpose. However, the application of TR 2005/15 relies on the taxpayer undertaking the trading activities or making the decisions relating to the trading activities themselves. In your case you have opened an account with an online broker who assigned you an accounts manager to conduct your trading activities. You did not conduct the trading activities and due to this the way in which you have conducted your activities is more akin to the actions of an investor rather than that of someone in business or undertaking a profit making scheme. Therefore any gain or loss you make will be a capital gain or loss.