Tax on trading in your country
What you learn in 3 minutesThis lesson is about the word 'declaration'. On a platform you never see that word. You see 'withdrawal', 'deposit' and 'closed trade'. A declaration is the separate step where you tell the Australian Taxation Office what those closed trades did over a year, and it is the step that decides what you actually keep. A single closed AUD/USD trade at 0.6640 can move A$66 on one standard lot for a ten pip move, so the record you keep is worth more than the memory of the trade.
Working out the money on one closed trade
| Step | Amount | Note |
|---|---|---|
| Instrument | AUD/USD | the pair quoted on the platform |
| Price at entry | 0.6640 | the quote when the trade opened |
| Position size | 1 standard lot | 100,000 units of the base currency |
| Value of one pip | A$10 | 100,000 x 0.0001 = 10 units of the quote currency, converted at the current rate |
| Pips gained | 20 pips | the distance the price moved in your favour |
| Gross result | A$200 | 20 pips x A$10 per pip |
| Costs to subtract | varies | spread, commission and any swap are set by the broker and differ between brokers |
The broker may round the pip value, charge commission on entry and exit, and add or subtract a swap for positions held overnight. The figure in the platform is the gross result, not the amount that reaches your bank account.
The mistake people make here
The common mistake is to treat the platform balance as the number that matters and to keep no separate record. People screenshot a winning month, forget the losing months, and then have nothing to show when the year ends. The fix is to export every closed trade as a file on the day it closes, and to keep the deposit and withdrawal records from PayID, BPAY or card statements in the same folder. Do that from the first trade, because a record rebuilt a year later is always incomplete.Check yourself
One standard lot of AUD/USD gains 15 pips. One pip is A$10. What is the gross result before costs?
15 x A$10 = A$150.
The same trade gains 15 pips on 0.20 lots instead. What is the gross result before costs?
0.20 lots is one fifth of a standard lot, so one pip is A$2. 15 x A$2 = A$30.
A trade loses 40 pips on one standard lot. What is the gross result before costs?
40 x A$10 = A$400 loss.
In Australia
- Authority
- The Australian Taxation Office (ATO) is the body that receives your declaration.
- Regulator
- ASIC regulates the brokers and platforms you trade through.
- Currency
- Amounts are declared in Australian dollars, written A$.
- Records
- Keep contract notes, statements and deposit records for the period the ATO requires; that period is set by the ATO and can change.
- Treatment
- Whether a result is treated as income or as a capital gain depends on your circumstances and on how often you trade; this varies between people and is not fixed by the platform.