What You Need to Know about Forex Trading in Australia
If you live in Australia and trade Forex on any online platform, you need to know how the government will be taxing the money you earn from trading. In many ways, Australian law mirrors Forex profit treatment in the U.S., Canada and many European countries, but there are some unique aspects to consider as well. The best way to comprehend the key features of the Forex trading landscape is to look at several topics, all of which pertain to Australian trading laws.
The Legal Landscape
Companies that offer trading and brokerage services in Australia are overseen by the national government. Because the oversight function tends to be of the non-meddling type, the country has seen a boom of foreign exchange trading, particularly since 2015 when media coverage of the industry was wide and positive. That year, a number of citizens made huge profits on the rising value of the Swiss Franc.
Nowadays, the government agency charged with regulating the industry, ASIC, is careful to keep an eye on unscrupulous practices and the abuse of customers. It’s always advisable to do business with an ASIC regulated broker. ASIC, the Australian Securities and Investments Commission, regulates all forms of securities trading for people who reside in Australia.
Tax Information for Traders
Local traders are free to use Australia-based brokers or offshore entities. The main point to remember about taxation is that if you reside in the country, whether you are a citizen or not, your earnings will be subject to tax. For the platforms, there are restrictions too. For instance, they are not allowed to accept initial credit card deposits greater than $1,000 on account opening.
It’s possible to trade foreign exchange pairs in one of two ways: directly on a Forex platform with a broker, or via CFDs, contracts for difference. In either case, you’ll need to report your Australia-based income from the activity. Note that the taxing authority considers money to be profit when you close a position. In other words, you need not close your entire account and remove the money.
The Best Brokers
It’s pretty easy to find the best brokers because there are several tools you can use to determine whether a particular website is legit, what minimum deposits are and what level of trust the company has earned with the public. First, always look at the bottom of a firm’s website main page to determine if they are an official ASIC-authorized broker. Next, check out their minimum deposit for opening an account. There’s a wide range of amounts, from a low of about $50 to $10,000, so be sure to know the company’s policy before opting to use them as your main trading platform.
Finally, check review sites and see what the top five or ten brokers are at any given time. Ratings change every few weeks. Based on these three criteria, the top choices right now are easyMarkets, IG, Saxo Bank, Plus500 and City Index.
Most Popular Forex Pairs
Not just in Australia but all over the world, the most actively traded pairs are USD/JPY, USD/GBP, USD/CHF, USD/CAD, AUD/USD, and NZD/USD. The U.S. dollar is USD. GBP is the British pound. CHF is the Swiss currency. CAD is the Canadian dollar. AUD is the Australian dollar. NZD is the New Zealand dollar.