Long term capital gain - how do I offset capital loss?

Discussion in 'Accounting & Tax' started by JoeK, 4th May, 2022.

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  1. JoeK

    JoeK Active Member

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    Hi Ladies and Gents

    I hope you are well.
    I think this is a fairly simple question and this is the first time I am dealing with. I am just getting familiar. If you can point me to ATO or other articles, then I am happy to read them. That would be great.

    I own some shares, so:
    1. Say I have $100,000 long term capital investment gains.
    2. 50% discount means $50,000 are taxable from the above $100k
    3. Say I have $25,000 capital loss

    Question: Can you please help me understand what is my taxable capital gain income?
    1. $50k - $25k (point 2 minus pint 3) = $25,000 taxable capital gain income
    2. $100k - $25k (point 1 minus pint 3) = $75k / 2 (due to point 2) = $37,500 taxable capital gain income


    Please assist.


    Thanks
     
  2. Terry_w

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

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    See my tax tip on this
     
  3. Paul@PAS

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

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    Assuming none are CGT events form collectables then you must reduce the gains by the loss first to arrive at a net gain ...that is then discounted.

    Ironically the taxpayer can choose whether to apply a loss to discount or non-discounted gains. I generally suggest to the NON-DISCOUNTED first to maximise the discount. But I have seen people incorrectly choose and overpay. There is a rare instance when you may benefit the other way about.
     
    Last edited: 4th May, 2022
  4. Simon Barker

    Simon Barker Well-Known Member

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    This would be correct. Capital losses are deducted before applying any discounts.

    See here
     
    Ross Forrester likes this.
  5. Marg4000

    Marg4000 Well-Known Member

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    It is #2. You deduct the loss before applying the 50% discount.

    But if your gains are in shares, you may be able to sell over more than one financial year if this benefits you.

    Consider maximising deductible superannuation contributions.
     
  6. JoeK

    JoeK Active Member

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    Simon Barker and Ross Forrester like this.