Thank you for all your detailed responses! The lack of resource examples for a hedging strategy to reduce CGT, is concerning (either no one is doing it or it is a very grey area for the ATO).
In relation to the following points you made:
What about the other costs incurred from opening & holding a short CFD position: Transaction/brokerage fees, short borrowing fees and negative dividends - can these be added to the cost base?
I've created a spreadsheet to establish probable outcome scenarios - and as per your example, at times there is a negative/negligible tax benefit and other times a large positive tax benefit. It's very fluid and a tax benefit is not guaranteed at all - especially for a long holding time. Worst case being the long side loses all profit and the short side gains all profit - then there is zero tax benefit and just a lot of unclaimable interest expenses. Given the uncertain nature of the tax benefit (size) and risks associated, surely receiving a CGT discount (if at all) should be legal?
Yep, I'm aware of this - falls under the "45 day franking credits rule".
This appears to be at the discretion of the ATO? Given as outlined above, that there are still risks associated with hedging (i.e. no guarantee for an exact CGT discount), then perhaps it cannot be seen as deliberate avoidance?
ddzx, your excellent responses will be appreciated once more!
