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Edited version of private ruling
Authorisation Number: 1011585754915
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Ruling
Subject: How to apply net capital losses
Question
Can you apply carried forward capital losses to offset any capital gain you make from the sale of your overseas property.?
Answer: Yes.
You can apply the carried forward capital losses against the capital gain you expect to make when you sell your overseas property.
This ruling applies for the following period:
1 July 2011 to 30 June 2012
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You have requested a private ruling relating to the sale of your overseas property and whether losses made on the sale of managed fund units can be used to offset any capital gain made.
You have provided details of your circumstances.
You currently have capital losses carried forward.
Relevant legislative provisions
Income Tax Assessment Act 1997
Section 100-50
Section 102-10
Section 102-15
Section 102-20
Division 115
Explanation:
To work out your net capital gain, reduce the capital gains you make during the income year by the capital losses (if any) you made during the income year.
Section 102-15 of the Income Tax Assessment Act 1997 sets out the rules for applying net capital losses against capital gains in future income years.
In calculating your net capital gain for the income year in which you dispose of your property, you apply net capital losses in the order in which they were made.
Example
Derek incurs net capital losses in 2005/06, 2007/08 and 2008/09. In 2009/10, Derek makes a capital gain. In working out the amount of his net capital gain for the 2009/10 income year, Derek must first reduce the capital gain by applying the 2005/06 net capital loss. If the net amount is still positive, Derek can then apply the 2007/08 net capital loss. If the net amount is still positive, Derek can then apply the 2008/09 net capital loss.
If you have owned your property for more than 12 months, and the other conditions are satisfied for the capital gain to be a discount capital gain, you can further reduce your net capital gain by the 50% capital gains tax discount.
For your information we enclose 2 fact sheets which provide an overview of capital gains tax and further information on the discount method of calculating capital gains.
More detailed information about calculating a capital gain or capital loss is available on our website www.ato.gov.au by searching the words 'guide to capital gains tax'.