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Edited version of private ruling
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Ruling
Subject: Capital gains tax - Carried forward capital losses.
Question:
Is the capital loss made in a previous year available to be carried forward to offset against future capital gains?
Answer:
Yes.
This ruling applies for the following periods:
Year ending 30 June 2012, and
Year ending 30 June 2013.
The scheme commences on:
1 July 2011.
Relevant facts and circumstances
You have reported carried forward capital losses in previous income years.
As at 30 June 2010 the capital loss carried forward as reported by you was substantial.
Initially this capital loss was calculated by your previous tax agent.
You have stated that the former liquidator currently holds all records to verify the capital loss made and you are in the process of retaining these records.
Assumption
This ruling is based on the assumption that you retain all the records to verify the capital loss.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 102-15 and
Income Tax Assessment Act 1997 Section 104-15.
Reasons for decision
Generally, you make a capital loss if your reduced cost base is larger than your capital proceeds. The excess is your capital loss. Current year capital losses can be applied against any capital gains made during an income year to determine a net capital gain or net capital loss.
A net capital loss that cannot be applied in an income year can be carried forward to a later income year. In other words, net capital losses can continue to be carried forward indefinitely and used to reduce future capital gains.
In respect of your capital loss, it is sufficient to keep records of the capital loss with your taxation records and carry it forward until such a time as you have a capital gain to offset it against.
It should be noted that, taxpayers must keep records of everything that affects their capital gains and capital losses. If a net capital loss is made, taxpayers must maintain records for five years after any capital gain is reduced by applying that capital loss.