When to use losses
You use your current year capital losses to offset your current year capital gains. You can choose which capital gains to subtract your losses from. If you have any capital gains that are not eligible for the CGT discount, subtract your losses from these gains first. This will result in the lowest payable CGT.
If you have prior years, also known as carry forward losses, you used them to offset your current year capital gains. If your prior year capital losses extinguished your current year capital gain, you do not have a current year capital gain. As capital loss can be carried forward indefinitely, there is order of using your capital losses to offset capital gains
There are capital losses you can't use to offset capital gains and they are listed below.
Carrying forward a net capital loss
If your allowable capital losses are greater than your capital gains, you have a net capital loss.
There is no time limit on how long you can carry forward a net capital loss.
Non-allowable capital losses
You cannot deduct capital losses you make from:
- personal use assets, such as boats or furniture
- assets that are exempt from CGT, such as cars and motorcycles
- collectables below a certain value
- a lease (whether the result of expiry, forfeiture, surrender or assignment) – except if its main purpose is producing income, such as for a commercial rental property or a car
- paying personal services income to yourself through an entity you have set up.
Losses from collectables
Capital losses from collectables can only be deducted from capital gains made from collectables. They cannot be deducted from gains made from other assets.
If you do not have a capital gain from another collectable, you can carry forward the capital loss to deduct it against a gain from a collectable in a future year.
A collectable is not subject to CGT if you acquired it for $500 or less (or acquired an interest in it when it had a market value of $500 or less). This means you ignore a capital gain or loss from the collectable.
Company losses
A company can deduct previous net capital losses from capital gains in the current year as long as it is either:
- substantially under the same ownership and control
- still in the same line of business.
Trust losses
Capital losses made by a trust cannot be distributed to the trust’s beneficiaries. The trust can carry forward its losses and deduct them from capital gains in future years.
Exempt entity losses
Losses made by an entity that is exempt from income tax are disregarded.
For more information and help on how to calculate you CGT, see Calculating your CGT.
Find out when you can and can't use losses to reduce your capital gains, and how to carry forward a net capital loss.