Australian tax implications of FOREX gains/losses | Forex Factory

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Australian tax implications of FOREX gains/losses

  • #1
  • First Post: Jul 15, 2011 6:02am Jul 15, 2011 6:02am

AUSTRALIAN tax implications of FOREX gains/losses

Hi,
I would like to know how AUSTRALIAN FOREX traders (non business) do their tax!

Please include any links that are specific to answer the question, if you have any.

Do you add up all the realized profits and the losses separately and add them to the income and deductions section? Or just the difference between the profit and losses minus your cash inputs.

Thanks!

  • #2
  • Edited 11:02pm Jul 15, 2011 7:50pm | Edited 11:02pm
Personally I just include the total as investment income, rather than separating them.

Unfortunately, if you make enough profit they will force you to go onto quarterly PAYG tax, which sucks when you are trying to compound your account!
  • #3
  • Jul 17, 2011 5:42am Jul 17, 2011 5:42am
Thanks for your reply.

So is this investment income/loss advised by an accountant? or Did you reference that from some ato documents?
  • #4
  • Jul 17, 2011 10:50pm Jul 17, 2011 10:50pm
Just my interpretation of ATO documents (no links sorry). I can't find anything concrete and every accountant will tell you something different. Even ringing the ATO gives a vague answer, where they basically say it's up to you - until we audit you!

I believe I can demonstrate to the ATO that I am doing it to generate income, rather than a hobby though, if it was on a smaller scale it might be a different story. If it was classed as a hobby it'd most likely be subject to CGT instead.
  • #5
  • Jul 17, 2011 11:04pm Jul 17, 2011 11:04pm
Find a good business accountant (CPA at least) willing to file personal tax returns, money well spend and tax deductible in your next years return.
You will sleep better and can concentrate on your business making pips.

Cheers
  • #6
  • Dec 5, 2015 6:33pm Dec 5, 2015 6:33pm
Quoting barbs666
AUSTRALIAN tax implications of FOREX gains/losses Hi, I would like to know how AUSTRALIAN FOREX traders (non business) do their tax! Please include any links that are specific to answer the question, if you have any. Do you add up all the realized profits and the losses separately and add them to the income and deductions section? Or just the difference between the profit and losses minus your cash inputs. Thanks!
I have seen an Australian video promoting fx where a woman says fx is tax free because she's over 60years old - is this correct?
  • #7
  • Dec 6, 2015 4:08am Dec 6, 2015 4:08am
Quoting barbs666
AUSTRALIAN tax implications of FOREX gains/losses Hi, I would like to know how AUSTRALIAN FOREX traders (non business) do their tax! Please include any links that are specific to answer the question, if you have any. Do you add up all the realized profits and the losses separately and add them to the income and deductions section? Or just the difference between the profit and losses minus your cash inputs. Thanks!
Its pretty simple, it's treated as another source of income like normal. But if you can justify it as an actual business and not just a hobby then you can have all sorts of benefits come tax time just like any business; deducting losses from incurred income and tax deductable expenses such as equipment work space etc etc.

If you want a more detailed answer let me know but Just pay the $130 for a good accountant and they will do the leg work for you but just remember that something of this nature usually is a big target for an audit so don't BS too much. Keep your receipts for everything.. T.V's (monitors Computers, mouses, keyboards, books, furniture, internet, your phone (cause you trade on that too).

The way they view trading as a business (you don't need an ABN) but it's basically determined by the time you put into it, the frequency you trade and the size you trade (the size is easy seeing as we trade on leverage and occupy thousands of dollars in currency in just one trade).

So strategically I would certainly recommend trying to get it viewed as a business. For all the BS you go through trading you deserve it.
Time hides Nothing
  • #8
  • Dec 6, 2015 6:08am Dec 6, 2015 6:08am
According to my limited understanding once you make more than 180K, you have pay 49% of profit in tax. Which is insane. Even if you form a company, it will bring down the tax to 30%, but when you take out money from that company, it will still be taxed at 49% if more than 180K.

To me, it looks like NZ is a sweeter deal. Company tax of 28% and max personal tax of 33%. In addition, any long term investment holding are tax free as there is no tax on GST. Normal trading will still be taxed like regular income as it is not really an investment. I don't think I have to tell anyone how big a difference this will make overtime to baseline equity due to compounding. So if some one is really making it big in forex in Australia, they will definitely be looking to move to NZ (atleast), if not to Singapore/Hongkong.
  • #9
  • Dec 6, 2015 6:15am Dec 6, 2015 6:15am
Quoting kiwi736
{quote} I have seen an Australian video promoting fx where a woman says fx is tax free because she's over 60years old - is this correct?
NO.
  • #10
  • Dec 6, 2015 1:05pm Dec 6, 2015 1:05pm
Quoting thokthok
According to my limited understanding once you make more than 180K, you have pay 49% of profit in tax. Which is insane. Even if you form a company, it will bring down the tax to 30%, but when you take out money from that company, it will still be taxed at 49% if more than 180K. To me, it looks like NZ is a sweeter deal. Company tax of 28% and max personal tax of 33%. In addition, any long term investment holding are tax free as there is no tax on GST. Normal trading will still be taxed like regular income as it is not really an investment. I don't...
You don't "take money out" of the company, you pay yourself a wage which is taxed, then the company profit is taxed. The total tax you pay on your annual earnings is about 30%, which isn't insane at all - it's what everyone else pays, why shouldn't traders pay the same?

NZ has no capital gains tax, so you can trade there without paying any tax .... but this is only while the current mob (National Party) is in power there. As soon as they lose an election to the Labour party - which will inevitably happen, whether it be at the next election or the one after - Labour has stated it will bring in CG tax, so moving there doesn't provide a long term benefit. If you don't want to pay tax at all, move to Bermuda, Cayman Islands or some other permanent tax haven.
si hoc legere scis nimium eruditionis habes
  • #11
  • Edited 4:30pm Dec 6, 2015 3:52pm | Edited 4:30pm
Quoting numbnuts
{quote} You don't "take money out" of the company, you pay yourself a wage which is taxed, then the company profit is taxed. The total tax you pay on your annual earnings is about 30%, which isn't insane at all - it's what everyone else pays, why shouldn't traders pay the same? NZ has no capital gains tax, so you can trade there without paying any tax .... but this is only while the current mob (National Party) is in power there. As soon as they lose an election to the Labour party - which will inevitably happen, whether it be at the next election...
It was wrong of me to publically express my views on taxation. I am sorry for that.

However, I suggest you read the post again. By taking money out, I meant salary + dividend etc. I have mentioned that any personal income over 180K is subject to 49% tax (45% tax + 2% medicare + 2% temp budget levy). Correct me if I am wrong here.

Also, read the part where I mention that forex trading is infact not tax free in NZ like you say. Long term holding investments definately are. I will not go into speculative debate about what next government is going to do.

You are right about the tiny tax free islands islands. Let me add one more location which is Dubai, which offers free trade zone companies. 100% tax free. Plus in the centre of Europe, USA and Australia.
  • #12
  • Dec 6, 2015 4:13pm Dec 6, 2015 4:13pm
From from the horse's ​mouth

https://www.ato.gov.au/rates/individ...ome-tax-rates/

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  • #13
  • Dec 6, 2015 11:36pm Dec 6, 2015 11:36pm
Quoting thokthok
Correct me if I am wrong here. Also ......
You are right, I must have been half asleep when I posted that - I wasn't trying to disagree with you about the tax rates, I was trying to make the point that if you want to trade in Australia, you need to be willing to pay the same tax as everyone else. If you make $200k trading, one way or another you pay the same amount of tax as someone who makes $200k doing something else.
si hoc legere scis nimium eruditionis habes
  • #14
  • Dec 7, 2015 2:51am Dec 7, 2015 2:51am
Quoting numbnuts
{quote} You are right, I must have been half asleep when I posted that - I wasn't trying to disagree with you about the tax rates, I was trying to make the point that if you want to trade in Australia, you need to be willing to pay the same tax as everyone else. If you make $200k trading, one way or another you pay the same amount of tax as someone who makes $200k doing something else.
your r right. i agree.
  • #15
  • Edited 8:10pm Jun 6, 2016 7:43pm | Edited 8:10pm
Quoting barbs666
AUSTRALIAN tax implications of FOREX gains/losses Hi, I would like to know how AUSTRALIAN FOREX traders (non business) do their tax! Please include any links that are specific to answer the question, if you have any. Do you add up all the realized profits and the losses separately and add them to the income and deductions section? Or just the difference between the profit and losses minus your cash inputs. Thanks!
It really depends on the structure within which you trade. As a hobby trader, there are very limited tax benefits afforded under this arrangement as the ATO will deem that the costs of running your hobby are in general 'non-deductible'.

Ideally, if you have several income streams aside from trading, then getting advice on an efficient tax structure to manage the tax impacts of those income streams is essential. For a 100% trader, however who has no other sources of income/losses or beneficiaries to offset against, then the tax solution is less favourable.

Ideally if you can substantiate that you operate a business then tax considerations are an important factor to take into account as their are substantial benefits on offer under a business structure that is well worth considering.

For example, consider those traders who unfortunately are not successful and incur substantial losses. A structure may provide an opportunity to reduce some of the sting in the tail from being able to offset those losses against other forms of assessable income. Let's hope that we don't fall into this situation....but to be realistic, most traders would fit in this category.

But now let's look on the bright side.

For example, if you specify trading as an eligible investment in your investment strategy of your self managed super fund, then you can trade for wealth creation within that structure and get the very useful tax benefits associated with that structure (eg. 15% tax on earnings). This is not a 'trade for a living' solution but is is a wealth generation solution for retirement.

An ideal structure for 'trading for a living' is a discretionary trust due to the lumpy nature of earnings and the ability under this structure to allocate profits to nominated beneficiaries which can be a very tax effective way to manage your income. Provided all profits are distributed each year there will be no tax payable for the trust, but the profit distributions will be taxable to the beneficiaries, or alternatively funnelled into other entities under a 'family election' arrangement which have accumulated tax losses to offset against.

A company structure, sole trader or partnership structure are my least preferred structures given their fairly limited tax minimisation methods available under those arrangements.
  • #16
  • Sep 20, 2016 10:22am Sep 20, 2016 10:22am
As I understand, at this point in time any profit made while gambling is not taxable. Are you able to portray your forex trading as a 'spread bet' as you do in the uk, thus making your trading account more like a gambling account.

i have seen server all articles for uk traders point this out and was wondering if an accounting trick like that could be used ini Australia also
  • #17
  • Last Post: May 31, 2018 1:50am May 31, 2018 1:50am
Quoting e.maxxx
As I understand, at this point in time any profit made while gambling is not taxable. Are you able to portray your forex trading as a 'spread bet' as you do in the uk, thus making your trading account more like a gambling account. i have seen server all articles for uk traders point this out and was wondering if an accounting trick like that could be used ini Australia also
does anyone know about this?
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