So, returning to your original question (start again ) your CFD may not explicitly come under CGT and therefore could possibly be a revenue deduction, which gives you the best of both worlds, i.e, you get a full 50% discount and get a revenue loss for your CFD loss, including the interest.
However, determining this with certainty is difficult and would probably require a private ruling from the ATO
The basic principles are as follows:
1. TR 2005/15 treats CFDs on revenue account when they are: (i) part of a business or (ii) part of a profit making scheme. If your CFD can be considered part of a 'profit making scheme', i.e., a scheme that includes your hedged investment shares, then you could get a revenue deduction for your CFD loss and also get a 50% discount for your entire capital gain
2. However, if your CFD is considered a separate scheme to your hedged shares, then your CFD loss may fall under the CGT legislation, including no loss for the interest (as original discussed) since TR 2005/15 states:
40. Whilst, as explained in previous paragraphs, gains or losses are expected most often to be on revenue account, because it is expected that usually they will be entered into with the purpose of profit-making, it is possible that in some cases the facts will establish that a person entered into the contract for differences for purposes other than to make a profit.
In your situation, it is arguable you did not buy the CFD to make a profit from the CFD. If this is determined to be true then your CFD loss would probably fall under the CGT legislation. If that is so, your CGT is determined as I originally said and your interest expense cannot be included in the cost base.
Note: Paragraph 24 of TR 2005/15 discusses the traditional use of futures contracts (which are CFDs) for hedging purposes. However, it does not discuss the tax treatment of hedging.
My view is the types of hedgers discussed carry on a business (of say wheat farming) and therefore their hedging contracts would be a business income deduction.
Where as you are not carrying on a business. You are an investor. Therefore, your hedge is probably CGT.
) your CFD may not explicitly come under CGT and therefore could possibly be a revenue deduction, which gives you the best of both worlds, i.e, you get a full 50% discount and get a revenue loss for your CFD loss, including the interest.
