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  • Calculating a capital gain or capital loss for a depreciating asset that is not a pooled asset


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    You make a capital gain if a depreciating asset's termination value is more than its cost. A capital gain from a depreciating asset is calculated as follows:

    (Termination value − cost) × (sum of reductions ÷ total decline)

    'Sum of reductions' -is the sum of the reductions in your deductions for the asset's decline in value that is attributable to your use of the asset, or having it installed ready for use, for a non-taxable purpose.

    'Total decline' -is the decline in value of the depreciating asset since you started to hold it.

    You make a capital loss if the depreciating asset's cost is more than its termination value. A capital loss from a depreciating asset is calculated as follows:

    (Cost − termination value) × (sum of reductions ÷ total decline)

    Example: Capital gain on depreciating asset

    Larry purchased a truck in August 2002 for $5,000. He used the truck 10% for private purposes. The decline in value of the truck up to the date of sale was $2,000. Therefore, the sum of his reductions is $200 (10% of $2,000). Larry disposes of the truck in July 2004 for $7,000. Larry calculates his capital gain from CGT event K7 as follows:

    ($7,000 − $5,000) × (200 ÷ 2,000)

    Capital gain from CGT event K7 = $200

    End of example
    Last modified: 25 Feb 2020QC 27448