I am an Australian citizen for tax purposes and I have recently started to trade US stock options (puts and calls) through OptionsXpress Australia. I've signed a W8-BEN form and I want to know what this means for me and how I will file my taxes in this financial year. I am also young and relatively new to income tax etc.
1) If I purchase a call on MSFT, for instance, and I sell that call and make a profit, will I have to pay capital gains on that profit?
The following are the tax brackets for the 2010-11 financial year:
$180,001 and over
2) Are capital gains counted as income for that financial year?
If so, if I am in the 2nd lowest tax bracket and I realise a capital gain that bumps me up to the 37,001 - 80,000 bracket, what tax do I pay on the capital gain? Do I pay the tax rate from the 2nd lowest bracket, or the new bracket?
3) I've heard of "Trader" and "Investor" status in relations to tax. What do these terms mean, what tax benefits do they have and what status should I have if I plan to make an income off trading stock options?
4) I've seen that Australia has an income tax treaty with the US. What does this mean for my taxes? Do I have to file anything with the IRS in regards to my trading profits/losses?
5) Can I self-manage my Australian superannuation and invest it into US stock and options?
6) If I invest in US index options, does this have any tax benefits over simply investing in US stock options? I've heard there is a 60/40 rule in the US taxation system whereby tax is reduced if you invest in index options. Is this the case in Australia?
7) Can anyone tell me any tax minimisation strategies you personally use for investing in international shares/derivatives markets?
I know I should seek the advice of a tax professional, but I figure that other Australians who trade international derivatives markets should be able to offer some helpful advice as well.