Can you offset a Capital Gain against Income Losses

Discussion in 'Accounting & Tax' started by feeding_the_fire, 29th Mar, 2020.

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  1. feeding_the_fire

    feeding_the_fire New Member

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    Hi,

    For some reason what I can offset against what causes me great confusion.

    Here's an example:

    • I have a portfolio. Every year expenses > income, at the end of the tax year I have $100K in accumulated losses.
    • I sell a property in my portfolio and realise capital gain of $250K.

    Question: I know that Capital Gains can only be offset by Capital Losses, but can they be offset by Income Losses? ie can the $250K be reduced by $100K?

    Cheers!
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Whats you other income?

    Say you earned $80,000 from work and all other income. If you had $100,000 in income losses your new income would be negative $20,000

    Now apply the capital gain. If it is $250k after taking into account the cost base expenses and 50% CGT discount your taxable income for the year would be -$20k + $250 = $230000 and you will pay tax on this at normal rates.
     
  3. feeding_the_fire

    feeding_the_fire New Member

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    Thanks Terry - sorry probably used an over simplified example there, but looks like yes, you can ultimately offset the income losses with the capital gain.

    Cheers!
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes any income losses will reduce income which will reduce tax.
     
    iloveqld likes this.
  5. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Non commercial loss tests may affect a loss being available in a tax return for offsetting any other income.