Are CFDs legal in Australia?

Yes, CFDs are legal and regulated by ASIC. However, ASIC introduced strict leverage caps in 2021, limiting retail clients to a maximum of 30:1 for forex, 20:1 for indices, 10:1 for commodities, and 2:1 for crypto. CFD providers must hold an Australian Financial Services Licence (AFSL).

Do CFD traders pay tax differently to share traders?

Yes. CFD gains and losses are treated as revenue account (not capital gains), meaning they are taxed as ordinary income. You cannot access the 50% CGT discount for assets held longer than 12 months. Losses can generally be offset against other income, subject to the non-commercial loss rules.

Can I hold CFDs in my SMSF?

Pure CFD providers such as Capital.com, easyMarkets, Pepperstone, and Plus500 do not support SMSF accounts. eToro and IG Australia do support SMSF accounts, but their holdings use a custodian model rather than CHESS sponsorship. SMSF trustees should seek advice before trading CFDs, as the leverage and derivative nature may breach superannuation investment rules.

What happens if my CFD provider goes bankrupt?

CFD providers in Australia are required to hold client money in segregated trust accounts under ASIC client money rules. However, if the provider becomes insolvent, you are an unsecured creditor for any funds held. This is different from real shares held under CHESS sponsorship, which remain yours regardless of what happens to the broker.

Do CFDs pay dividends?

Some CFD providers pay a dividend adjustment for long positions held on ex-dividend date. This is a cash adjustment calculated from the dividend amount, not a real dividend. You do not receive franking credits, and the adjustment is taxed as income rather than as a franked dividend. Short positions may be charged a corresponding amount.

Can I trade CFDs on ASX shares?

Yes, many CFD providers offer ASX share CFDs. However, pure CFD providers like Capital.com, easyMarkets, Pepperstone, and Plus500 do not offer real ASX share trading. eToro and IG Australia offer both real ASX shares (custodian-held) and ASX share CFDs. The key difference is that CFD positions are not CHESS sponsored and do not give you ownership rights.

Guide · derivatives

CFDs vs real share trading: what every Australian investor needs to know first

CFDs look like share trading but you don't actually own anything. The difference matters more than most platforms admit.

By Investmatch Research Team · Last updated 15 May 2026

What is a CFD, and how is it different from buying real shares?

If you have browsed trading platforms in Australia, you have probably seen ads for CFDs. The pitch is tempting: trade global markets with a small deposit, no commission, and the ability to profit when prices fall. But a contract for difference (CFD) is not a share. It is a derivative. You never own the underlying asset. You are entering a contract with the provider to exchange the difference in price between when you open and close the position.

This guide explains how CFDs work, how they differ from real share ownership, and when each might suit you.

What a CFD actually is

A CFD is a leveraged financial product offered by providers such as Capital.com, easyMarkets, Pepperstone, and Plus500. You do not buy shares in a company. You do not appear on a company's share registry. You do not receive dividends, franking credits, or voting rights.

Instead, you speculate on price movements. If the ASX 200 rises 1% and you hold a long CFD position, your gain is roughly 1% multiplied by your leverage. If it falls 1%, you lose the same multiplied amount. Because CFDs are leveraged, small price moves produce outsized gains or losses.

ASIC's 30:1 leverage cap

In 2021, ASIC introduced strict leverage limits for retail CFD traders. The maximum leverage available to retail clients is 30:1 for major currency pairs, 20:1 for indices, 10:1 for commodities, and 2:1 for cryptocurrencies. These limits are designed to reduce the risk of retail investors losing more than their deposit, though it is still possible to lose your entire account balance.

How CFD brokers make money

CFD providers do not charge brokerage in the traditional sense. Instead, they make money through:

The spread. The difference between the buy and sell price. Pepperstone advertises a 0.5-pip spread on AUD/USD, while Capital.com and Plus500 quote 0.7 pips. These spreads are wider than what institutional traders pay, and they add up over frequent trades.
Overnight financing. If you hold a CFD position open past the daily cut-off, you pay (or receive) an overnight funding rate. For long positions, this is typically a benchmark rate plus a broker margin. Over weeks or months, these costs can erode any gains.
Currency conversion. If you trade a market denominated in a foreign currency, the broker converts your Australian dollar margin at their FX rate. IG Australia charges a 0.7% FX fee on international trades.
Inactivity fees. easyMarkets charges $25 per month after a period of inactivity. Plus500 charges $10. Pepperstone and Capital.com charge nothing.

What you give up with CFDs

Because you never own the underlying asset, you miss out on:

Franking credits. Australian company dividends come with imputation credits. CFD holders get nothing.
Dividends. Some CFD providers pay a "dividend adjustment" for long positions, but it is a cash adjustment, not a genuine dividend. It is taxable differently and typically less favourable.
Voting rights. You cannot vote at AGMs or participate in capital returns.
Share registry presence. Your name does not appear on the company's register. You cannot participate in rights issues or share purchase plans directly.
CHESS sponsorship. Real ASX shares can be held under CHESS sponsorship, meaning they are registered in your name on ASX's settlement system. CFD positions are never CHESS sponsored. Even platforms like eToro and IG Australia that offer real share trading alongside CFDs use a custodian model for real shares, not CHESS.

Real share trading: what you actually own

When you buy real shares through a broker, you become a part-owner of the company. You receive dividends (with franking credits if applicable), you can vote, and your holdings are recorded on the company's register. If the broker goes under, your shares are still yours.

Platforms like eToro and IG Australia offer both real share trading and CFDs. On eToro, non-leveraged ASX share and ETF purchases are commission-free and executed as real trades. Leveraged or short positions are executed as CFDs and incur a 0.15% open/close spread plus overnight financing. IG Australia offers zero-commission ASX share trading on its IG Share Trading account, with a 0.25% p.a. platform fee on holdings value. Both use a custodian model rather than CHESS sponsorship, meaning the broker holds the shares on your behalf.

Pure CFD providers like Capital.com, easyMarkets, Pepperstone, and Plus500 do not offer real share trading at all. Every position is a derivative.

When CFDs might make sense

CFDs are not inherently bad. They are a tool, and like any tool, they suit specific jobs.

Short-term tactical trades. If you want to speculate on a stock's price move over the next few hours or days, CFDs avoid the settlement delays of real trading. You can open and close positions instantly.
Going short. Real share trading in Australia requires either a margin lending account with shorting approval or access to CFD products. CFDs let you profit from falling prices directly.
Leverage for small accounts. With a $500 deposit, you can control a position size of $10,000 on an index CFD (at 20:1 leverage). This is impossible with real shares unless you use margin lending, which has its own complexities.
Access to global markets. IG Australia offers CFDs on 17,000+ markets. Capital.com offers 6,000+. You can trade US, European, and Asian indices, commodities, currencies, and crypto from one account.

When CFDs do not make sense

Long-term wealth building. The combination of overnight financing costs, spreads, and the absence of dividends and franking credits makes CFDs a poor vehicle for holding positions for months or years. Real shares held through a low-cost broker compound returns over time. CFDs do not compound; they decay.
SMSF investing. None of the pure CFD providers support SMSF accounts. eToro and IG Australia do, but they use a custodian model. If you want CHESS-sponsored holdings in your SMSF, you need a broker like CommSec or SelfWealth.
Passive investing. CFDs have no auto-invest or DCA functionality. eToro offers auto-invest with multiple options, but only for real shares. Pure CFD providers offer no such feature.
Anyone who struggles with discipline. ASIC data shows that 80% of retail CFD traders lose money. The leverage that amplifies gains also amplifies losses. If you cannot set stop-losses and stick to them, CFDs will cost you.

The bottom line

CFDs and real share trading serve different purposes. Real shares build wealth over time through ownership, dividends, and compounding. CFDs are a short-term trading instrument for speculating on price direction with leverage. Mixing them up is one of the most expensive mistakes a new investor can make.

If you want to own a slice of Australia's largest companies and collect dividends for the next 20 years, buy real shares through a CHESS-sponsored broker. If you want to trade short-term price moves with a defined risk budget, CFDs are a legitimate option. Just know what you are giving up before you open that first position.