Tax Deductibility Of Hedging

I gather than if I was to hedge the fx exposure of an overseas property the gains or losses on the hedge would be tax deductible, provided you can show the link between the hedge and the property (at a high level) and aren't punting.

What if I want to hedge the rise/fall in an Australian property portfolio using out of the money ASX200 put options? Again assuming you can show a clear connection between the two (hedged value not greater than property portfolio, tracking hedge vs property values), would the premiums that you spend each period (i.e. you would generally pay x for the option and it would expire worthless therefore generating a loss) be tax deductible?

A follow on question is, if the answer to the first part is yes they are deductible, would they be deductible against income in the period incurred as supposed to being capital losses to offset against future capital gains?

This is a bit specific and left field, so I haven't been able to find anything on this out in the universe. And don't worry, I'll get a second opinion before pulling the trigger so all thoughts are welcome!

 

How would hedging on the ASX hedge the resi property market?

Outside that, I know - in a "non-professional, someone told me once" kind of way - that hedging your share portfolio via options is tax deductible, however I think hedging your IP's via the sharemarket would be a long bow to draw.

The FX on your OS properties makes sense, where the ASX does not. If there was a resi listed property trust you could buy options against, that might be more suitable?

 

I can't see how that could be deductible against the property income.

 

Hedging the property value would be a CGT element at best. And then I may argue its futile as unless its short term hold the costs of hedging cant be 100% replicated long term. If a longer term hedge is a natural hedge you may actual lose tax deductibility for expenses and you may be exchanging an income right for a CGT right and then its not deductible.

.A complex issue. Only hedging which addresses income may be deductible.

 

If you are taking a hedge against the rental income stream it is deductible. If you are hedging against the capital value it is capital.

If your ASX shares are trading stock as a share trader the cost of hedging the trading stock is deductible.

If you are taking options to pick up on the market movement of the options they are deductible.

Flip side if you profit from it.

Unrealised fx gains vary depending on what section of the law you are dealing with - 775 or 230.

 

sounds to me as you would need to consider division 775

 

Thanks a lot for the responses, can definitely see the problems here. I'll keep all of this in mind.