Resident tax expert Adrian Raftery, aka ‘Mr Taxman’, answers readers’ most pressing trading tax questions.

Q: I work full time and supplement my income trading stock CFDs. So far in this financial year I have made around $20,000. How do I deal with this on my tax return?

A: Your net trading income should be shown in your annual tax return under the heading ‘Net income or loss from business’. It will be added to your other assessable income and taxed at your marginal tax rate. Make sure you remember to offset any expenses you incurred gaining this income, such as internet, journals, subscriptions, telephone, and depreciation on your computer and any other equipment.

If you are using another entity, such as a company or family trust, any trading income is shown in the business income schedule of that entity.

Based on your trading profit to date, expect to have to pay back some tax this year. It might be a good idea to do some tax planning and pre-pay some of your expenses up to 12 months in advance, such as subscriptions or interest on borrowings. It is also a good idea to join a registered tax agent’s lodgement programme so you get a bit of extra time before you need to pay the taxman...

Excerpted from an article originally published in the Jul/Aug 2011 issue of YourTradingEdge magazine. All rights reserved. © Copyright 2011, Your Media Edge Pty Ltd.
If you are a subscriber to YourTradingEdge magazine, you will receive this article in your Jul/Aug 2011 issue of YTE. If you are not a subscriber, click here to subscribe, or to purchase this issue as a single back issue, click here.