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Step 8 Applying capital losses against capital gains

Last updated 5 October 2009

If you do not have any capital losses from assets you disposed of this year or unapplied net capital losses from earlier years, go to step 9.

If you made any capital losses this year, deduct them from the amount you wrote at H. If you have unapplied net capital losses from earlier years, deduct them from the amount remaining after you deduct the capital losses made this year. Deduct both types of losses in the manner that gives you the greatest benefit.

Deducting your losses

You will probably get the greatest benefit if you deduct capital losses from capital gains in the following order:

  1. capital gains for which neither the indexation method nor the discount method applies (that is, if you bought and sold your shares within 12 months)
  2. capital gains calculated using the indexation method, and then
  3. capital gains to which the CGT discount can apply.

Losses from collectables and personal use assets

You can only use capital losses from collectables this year and unapplied net capital losses from collectables from earlier years to reduce capital gains from collectables. Jewellery, art and antiques are examples of collectables.

Losses from personal use assets are disregarded. Personal use assets are assets mainly used for personal use that are not collectables - such as a boat you use for recreation. See Guide to capital gains tax 2005–06 for more information.

If the total of your capital losses for the year and unapplied net capital losses from earlier years is greater than your capital gains, go to step 11.

Start of example

Example 8: Applying a net capital loss

Fred had a net capital loss of $75 from some shares that he sold last year and no other capital gains or capital losses this year. He can reduce this year's capital gain of $875 by $75. Fred's remaining capital gain is $800.

End of example