• How to calculate a capital loss

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    Generally, you make a capital loss if your reduced cost base is greater than your capital proceeds. The excess is your capital loss.

    Example

    Write-off deduction

    Antonio acquired a new income-producing asset on 28 September 1994 for $100,000. He sold it for $90,000 in November 2001. During the period he owned it, he was allowed write-off deductions of $7,500. Antonio works out his capital loss as follows.

    Cost base

    $100,000

    less write-off deduction

    $7,500

    Reduced cost base

    $92,500

    less capital proceeds

    $90,000

    Capital loss

    $2,500

    Example

    Capital loss (reduced cost base greater than capital proceeds)

    In July 1996, Chandra bought 800 shares at $3 per share. He incurred brokerage fees and stamp duty of $100. In December 2001, Chandra sold all 800 shares for $2.50 per share. He incurred brokerage fees of $75. He made a capital loss, calculated as follows.

    Calculation of reduced cost base

    Date expense incurred

    Description of expense

    Expense

    July 1996

    Purchase price

    $2,400

    July 1996

    Brokers fees and stamp duty

    $100

    December 2001

    Brokers fees and stamp duty

    $75

    Reduced cost base

    $2,575

    Calculation of capital loss

    Reduced cost base

    $2,575

    Capital proceeds 800 x $2.50

    $2,000

    Capital loss

    $575

    However, the reduced cost base is not relevant for some types of CGT events. In these cases, the particular CGT event explains the amounts to use (see Summary of CGT events, appendix 1).

    Note-Reduced cost base

    You cannot index a reduced cost base.

    Example

    Applying losses and the CGT discount

    Sharni acquired some shares in June 1992 and some units in a unit trust in May 1996. She had a net capital loss of $12,000 from the 2000-01 income year (a prior year) and made a further capital loss of $6,000 in August 2001 (the current year).

    Sharni sold the shares in July 2001 and made a capital gain of $4,000 calculated using the indexation method. She then sold the units during February 2002 and made a capital gain of $22,000 using the discount method (before applying the 50% discount).

    Sharni may choose to apply her capital losses in any order. However, she must subtract all of her capital losses from her capital gains before applying the CGT discount to any remaining capital gain calculated using the discount method.

    She chooses to apply the $6,000 current year capital loss firstly against the $4,000 gain realised in July 2001, leaving a current year capital loss balance of $2,000.

    $4,000 - $6,000 = $2,000 capital loss remaining

    Sharni then applies the remaining $2,000 current year capital loss and the prior year net capital loss of $12,000 (a total of $14,000) against the gain of $22,000 calculated using the discount method.

    $22,000 - $14,000 = $8,000

    She then applies the CGT discount of 50 per cent to the remaining capital gain of $8,000.

    $8,000 X 50% = $4,000

    This means Sharni's net capital gain for the 2001-02 income year is $4,000.

    Note

    Deducting capital losses

    If Sharni had deducted her capital losses first from her discount capital gains, her net capital gain would have been

    [($22,000 -$18,000) X 50% + $4,000] = $6,000

    Last modified: 06 Oct 2009QC 27417