Step 1
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Work out your capital proceeds from the CGT event
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The capital proceeds are what you receive, or are deemed to receive, when you sell or otherwise dispose of your CGT asset.
For example, with shares the capital proceeds may be:
- the amount you receive from the purchaser
- the amount you receive from a liquidator
- the amount or value of shares or other consideration you receive on a merger/ takeover, or
- the market value if you give shares away.
Example
Fred sold his parcel of 1000 shares for $6000. Fred's capital proceeds are $6000.
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Step 2
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Work out the cost base of your asset
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The cost base of your asset is what your asset cost you, including the incidental costs of buying, selling, maintaining and preserving it.
The cost base for an asset such as a share or unit may also need to be reduced by the amount of any non-assessable payment you received from the company or fund during the time you owned the share or unit. This is explained under Non-assessable payments.
Interest you have paid on money borrowed to buy shares or units will not form part of your cost base if you have claimed a deduction for it in any income year.
For shares, the cost base is usually the cost of buying the shares including brokerage and stamp duty and costs on selling the shares.
Example
Fred had bought 1000 shares at $5 each ($5000). He was charged $50 for brokerage and paid duties of $25. When he sold the shares he paid $50 brokerage.
The cost base of his shares is $5000 + $50 + $25 + $50 = $5125.
Information
There are certain circumstances where a cost base may be indexed. This is called the indexation method and the cost base would then become an 'indexed' cost base. For more information, see part A of this guide or the worked examples in chapter B2.
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Step 3
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Did you make a capital gain?
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Subtract the amount in step 2 from the amount in step 1.
If the capital proceeds are greater than the cost base, the difference is your capital gain.
Example
As Fred sold his shares for $6000, he subtracts the $5125 from the $6000 to arrive at $875.
Fred made a capital gain of $875.
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Step 4
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If you did not make a capital gain, work out the reduced cost base of the asset
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If you did not make a capital gain, you need to calculate a reduced cost base of your asset before you can work out any capital loss.
The reduced cost base is the cost base less any amounts you need to deduct from the cost base. Interest on borrowings and indexation are not included.
Example
In our example, Fred's cost base and reduced cost base for his shares are the same.
Note-Reduced cost base
For shares, generally the cost base and reduced cost base are the same. For units, the cost base and reduced cost base need to be adjusted for tax-deferred amounts and CGT-concession amounts received before 1 July 2001. CGT concession amounts paid after 1 July 2001 are no longer taken off the cost base nor the reduced cost base. Only the reduced cost base needs to be further adjusted for a tax-free amount. A tax-exempted amount does not affect the cost base or reduced cost base. The fund should advise you of these amounts in its statements.
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Step 5
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Did you make a capital loss?
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If the capital proceeds are less than your reduced cost base, the difference is your capital loss.
Example
If Fred had sold his shares for $4000 instead of $6000, he would have a capital loss of $1125 (that is, his reduced cost base of $5125 less his capital proceeds of $4000).
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Step 6
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Did you make neither a capital gain nor a capital loss?
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If the capital proceeds are less than or equal to the cost base but more than the reduced cost base, you have not made a capital gain or a capital loss.
Example
If Fred had sold his shares for $5125, he would not have made a capital gain or a capital loss.
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Step 7
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Work out your total current year capital gains-H item 17
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Now you need to show the total of all of your capital gains at H . If you have more than one asset which resulted in a capital gain, you should add those amounts. If you only had one asset, show the amount of the capital gain relating to that asset. If you have any capital losses, do not deduct them from the capital gains before showing the total amount at H.
Example
From step 3, Fred would show $875 at H item 17 on his tax return.
Handy hint
If you also received a distribution from a managed fund, you should include here your total capital gains (from step 3 in chapter C1).
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Step 8
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Applying capital losses against capital gains
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If you have no capital losses from assets you disposed of this year nor a net capital loss from an earlier year that you were told to carry forward to this year, go to step 9.
Otherwise, you can now deduct your capital losses from the amount you wrote at H. You may do this in the order that gives you the greatest benefit.
If your capital losses are greater than your capital gains, go to step 11.
Example
If Fred had a net capital loss of $75 from some shares that he sold last year, he reduces his capital gain of $875 by $75. Fred's remaining capital gain is $800.
Handy hint
The greatest benefit is probably to deduct capital losses against:
i. 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)
ii. capital gains calculated using the indexation method and then
iii. capital gains to which the CGT discount can apply.
Note-When you cannot apply the CGT discount
Remember, you cannot apply the CGT discount to capital gains calculated using the indexation method. You also cannot apply the CGT discount to other capital gains for which the discount is not available-for example, CGT assets you bought and sold within 12 months.
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Step 9
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Applying the CGT discount
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Where available, you can now apply the CGT discount to any remaining capital gains calculated using the discount method by reducing these capital gains by 50 per cent.
Example
As Fred had owned his shares for at least 12 months, he can reduce his $800 gain by the CGT discount of 50 per cent to arrive at a net capital gain of $400 (cents are not shown):
$800 x 50% = $400.
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Step 10
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Work out your net capital gain-A item 17
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At A you show the total of your remaining:
- capital gains calculated using the indexation method
- capital gains to which the CGT discount of 50 per cent has been applied and/ or
- capital gains calculated using the 'other' method.
Example
Fred shows his net capital gain of $400 at A item 17 on his tax return.
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Step 11
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Work out your carry-forward losses-V item 17
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If your capital losses were greater than your capital gains, you were directed to this step from step 8.
If you have capital losses remaining, you should show '0' (zero) at A on your tax return.
At V, show the amount by which all your capital losses are greater than your capital gains. You can now carry these capital losses forward to later income years until you have capital gains from which to deduct these capital losses.
Example
Continuing the example from step 5, with Fred's sale price of $4000 for his shares, he would show '0' (zero) at A and $1125 at V item 17 on his tax return.
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