• How to calculate a capital loss

    Attention

    Warning:

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

    End of attention

    Generally, you make a capital loss if your reduced cost base is greater than your capital proceeds. The excess is your capital loss.

    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 the Summary of CGT events at appendix 3).

    Note
    Reduced cost base

    You cannot index a reduced cost base.

    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 2000. During the period he owned it, he was allowed write-off deductions of $7500. 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

    Example
    Capital loss (reduced cost base greater than the capital proceeds)

    In July 1996 Chandra bought 800 shares at $3 per share. He incurred brokerage fees and stamp duty of $100. In December 2000, Chandra sold all 800 shares for $2.50 per share. He incurred brokerage fees of $75. He made a capital loss, calculated as follows.

    Calculation of reduced cost base

    Date expense incurred

    Description of expense

    Expense
    $

    July 1996

    Purchase price

    2 400

    July 1996

    Brokers fee and stamp duty

    100

    December 2000

    Brokers fee and stamp duty

        75

    Reduced cost base

    2 575

    Calculation of capital loss

    $

    Reduced cost base

    2 575

    Capital proceeds 800 x $2.50

    2 000

    Capital loss

    575

    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 has a net capital loss of $12 000 from the 1999-2000 income year (a prior year), and makes a further capital loss of $6000 in August 2000 (the current year).

    Sharni sells the shares in July 2000 and makes a capital gain of $4000 using the indexation method. She then sells the units during February 2001 and makes a capital gain of $22 000 using the discount method.

    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 discount method capital gain.

    She chooses to apply the $6000 current year capital loss firstly against the $4000 gain realised in July 2000, leaving a current year capital loss balance of $2000.

    $4000-$6000 = $2000 capital loss remaining

    Sharni then applies the remaining $2000 current year capital loss and the prior year net capital loss of $12 000 (a total of $14 000) against the discount method gain of $22 000.

    $22 000-$14 000 = $8000

    She then applies the CGT discount of 50% to the remaining capital gain of $8000.

    $8000 x 50% = $4000

    This means Sharni's net capital gain for 2000-01 is $4000.

    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) x 50% + $4000] = $6000

    Last modified: 31 Aug 2010QC 16195