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
Antonio acquired a new income-producing asset on 28 September 1999 for $100,000. He sold it for $90,000 in November 2002. 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 |
End of example
Example: Capital loss (reduced cost base greater than capital proceeds)
In July 1996, Chandra bought 800 shares at $3 per share. He incurred brokerage and stamp duty of $100. In December 2002, Chandra sold all 800 shares for $2.50 per share. He incurred brokerage of $75. He made a capital loss, calculated as follows.
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 |
Reduced cost base |
$2,575 |
Capital proceeds 800 × $2.50 |
$2,000 |
Capital loss |
$575 |
End of example
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 appendix 1: Summary of CGT events).
Note: Reduced cost base
You cannot index a reduced cost base deduction