• How to calculate a capital loss

Warning:

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

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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 deduction

Antonio acquired a new income-producing asset on 28 September 1994 for \$100,000. He sold it for \$90,000 in November 2001. 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 fees and stamp duty of \$100. In December 2001, Chandra sold all 800 shares for \$2.50 per share. He incurred brokerage fees of \$75. He made a capital loss, calculated as follows.

 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 Summary of CGT events, appendix 1).

Note-Reduced cost base

You cannot index a reduced cost base.

Example: Applying losses and the CGT discount

Sharni acquired some shares in June 1992 and some units in a unit trust in May 1996. She had a net capital loss of \$12,000 from the 2000-01 income year (a prior year) and made a further capital loss of \$6,000 in August 2001 (the current year).

Sharni sold the shares in July 2001 and made a capital gain of \$4,000 calculated using the indexation method. She then sold the units during February 2002 and made a capital gain of \$22,000 using the discount method (before applying the 50% discount).

Sharni may choose to apply her capital losses in any order. However, she must subtract all of her capital losses from her capital gains before applying the CGT discount to any remaining capital gain calculated using the discount method.

She chooses to apply the \$6,000 current year capital loss firstly against the \$4,000 gain realised in July 2001, leaving a current year capital loss balance of \$2,000.

\$4,000 − \$6,000 = \$2,000 capital loss remaining

Sharni then applies the remaining \$2,000 current year capital loss and the prior year net capital loss of \$12,000 (a total of \$14,000) against the gain of \$22,000 calculated using the discount method.

\$22,000 − \$14,000 = \$8,000

She then applies the CGT discount of 50 per cent to the remaining capital gain of \$8,000.

\$8,000 × 50% = \$4,000

This means Sharni's net capital gain for the 2001-02 income year is \$4,000.

End of example

Note: Deducting capital losses

If Sharni had deducted her capital losses first from her discount capital gains, her net capital gain would have been

[(\$22,000 − \$18,000) × 50% + \$4,000] = \$6,000