Step 6 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 1997-98 before you use any net capital loss made in 1998-99. You can then choose which method to use to calculate your capital gains according to which one gives you the best result. Again, for most people the order that usually provides the greatest benefit and the smallest net capital gain is:

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

Deduct your prior year capital losses from your remaining current year capital gains and make a note of any capital gains remaining.

If you have an amount of unapplied capital losses, you will need to keep a record of any excess capital losses from collectables and other CGT assets that were not applied to reduce your capital gains. These amounts can be carried over and used to reduce your future capital gains. If you have reduced your capital gains to zero, print '0' at label A.

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 $2920 of discount capital gains remaining. Taking this example further, Kathleen would now also deduct the prior year net capital loss of $400 from her discount method capital gain of $2920:

$2920-$400 = $2520

This leaves $2520 of discount method capital gains.

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 label V is still $500 because this is what she will carry forward as losses from collectables in future income years.

Last modified: 31 Aug 2010QC 16195