Claiming losses from the disposal of investments
This information only applies to a loss you get from disposing of investments – not a reducton of value in investments you continue to hold or a reduction in the value of your super fund's investments.
If you have realised a loss from the disposal of investments, such as shares, and your loss is a:
- capital loss
- it can't be offset against your income including income from other sources
- it can be offset against capital gains
- it may be carried forward to offset against future capital gains
- it can't be converted to revenue losses in future years, even if you haven't been able to offset it against a capital gain
- revenue loss
- it can be offset against income from other sources.
When looking at whether your loss is a capital loss or revenue loss, you need to consider:
It's important to keep proper records to verify your claim examplerecords of purchases and sales of your shares. If we review your tax returns and it is found that losses have been incorrectly claimed, penalties may apply.
How your investments have been taxed in the past
How your investments were taxed in prior years is relevant when working out how to treat them when you dispose of them in the current year. If there has been minimal change in the nature of your investment activity, it's likely the same tax treatment applies in the current year.
If your loss is a:
- capital loss, it arose from disposing of investments that gave income categorised in the past as a capital gain
- revenue loss, it arose from disposing of investments that gave income categorised in the past as ordinary (business) income.
In the 2012–13 financial year, Abbey decided to invest in the stock market for the first time and purchased 1,000 shares in Lorca Enterprises at $25 per share.
In the 2013–14 financial year, she sold 200 shares for $35 each and she included the capital gain when working out her net capital gain for her 2014 tax return.
In the 2014–15 financial year, she didn't buy or sell any shares and received dividends for the remaining 800 shares.
In the 2015–16 financial year, Abbey decided to sell all her shares. The market price when she sold was $13 per share.
Abbey has realised a capital loss. Her previous behaviour indicates that she held the shares for investment purposes and was not in the business of share trading.
Abbey’s capital loss cannot be converted to a revenue loss. The capital loss can only be offset against a future capital gain.
End of example