Step 6 - Applying prior year net capital losses



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

End of attention

If you do not have any prior year net capital losses, go to step 7. Otherwise, read on.

You can further reduce your current year capital gains by applying any prior year net capital losses.

Prior year net capital losses must be applied in the order you made them (for example, use a net capital loss from 1998-99 before you use any net capital loss from 1999-2000). You can then apply these losses against your capital gains in the manner that gives you the best result. Again, for most people the order that usually gives the greatest benefit and the smallest net capital gain is to apply the capital losses against capital gains calculated using the:

  1. 'other' method
  2. indexation method
  3. discount method.

Apply your prior year capital losses against your remaining current year capital gains and make a note of any capital gains remaining. If you have prior year capital losses that can be applied this year they must be applied here. You cannot choose to defer to a later year any amount that can be applied this year.

You will need to keep a record of any unapplied net capital losses from prior years. These amounts can continue to be carried forward and used to reduce your future capital gains. These will be recorded at V Net capital losses carried forward to later income years (see step 9). If you have reduced your capital gains to zero, do not put anything at A Net capital gain.

Example - Prior year net capital losses

Following on from our earlier example, let us also now assume that Kathleen has the following to consider.

Kathleen has a prior year capital loss of $400 that is not a capital loss from collectables or personal use assets.

In our example so far, Kathleen applied her current year capital loss and had $2,920 of capital gains calculated using the discount method remaining.

Taking this example further, Kathleen would now also deduct the prior year net capital loss of $400 from her capital gain of $2,920 calculated using the discount method:

$2,920 - $400 = $2,520

This leaves $2,520 of capital gains calculated using the discount method.

Kathleen must use all current year capital losses and prior year net capital losses before applying the CGT discount of 50%. In this example, the amount at V is still $500 because this is what she will carry forward as losses from collectables to future income years.

End of example
Last modified: 04 Mar 2016QC 27527