Tax Implications of Gains from Trading in CFDs

If you are trading CFDs in Australia, you obviously want to know the tax implications in regard to gains or losses that you make in the process because there is a confusion whether trading CFDs is a gambling activity or not.   

Any gains arising from gambling contracts do not qualify as assessable income/loss nor shall they be considered under capital gain or loss. The ATO holds the view that trading CFDs is not a gambling activity.

The Australian Tax Office (ATO) considers any profit made or loss incurred during the process of trading CFDs is assessable income or tax deductible as the case may be. However, the profits obtained and losses incurred must be a result of a business operation or transaction and the transaction/s must have been entered into as an ordinary part of carrying on a business. Gains from trading CFDs that do not meet these conditions qualify for tax as capital gain or loss.

This also means that while calculating capital gains arising from trading CFDs, the tax office will give due consideration to cost of acquisition and factors that apply to buying and selling assets. In the case of trading CFDs, the cost of acquisition includes the price plus charges, fees, interest or any other expense that you may incur for acquiring and holding the CFD. Similarly, the cost that you may incur for disposing of the CFD will also be considered. Similarly, any benefits such as interest, dividends or any other adjustment made to your account during the course of business of trading CFDs shall form a part of net gain.  

The above provisions apply to resident Australians. If you are a non-resident, you may want to consult a professional to know your status as well as the tax implications of trading CFDs.