Losses can be used to offset gains. But capital losses can only be used to offset capital gains. Losses are applied before the 50% discount. Example John sold a property in a mining town for a $100,000 taxable loss in 2014-2015. In 2015-2016, John sold another property with a $200,000 capital gain and John is happy because 50% of the gain is $100,000 and that equals the loss. Sadly John’s happiness is premature. First, the gain on the current property is worked out by deducting all the usual expenses such as stamp duty etc. And then the loss from previous years is applied. Say John had a $200,000 again after all other expenses taken into account. This would be reduced by the carried forward loss of $100,000 and John will end up with a $100,000 gain. Then the 50% discount will be applied and John’s taxable income from the property will be $50,000. - But if John had sold both properties in the same tax year the result would be the same. Example John has a capital loss of $100,000 on the mining town property and a $200,000 gain on the other property (after all expenses). This is a net gain of $100,000. the 50% discount is applied and John's taxable gain is $50,000 - However if John sold the property with the gain first things may work out differently. Example John has both properties on the market for sale. He finds it easier to sell the property with the gain first and the contract is entered into in May. In July, he enters a contract to sell the mining property. John would have a capital gain of $200,000 x 50% = $100,000 taxable income in 2014-2015 year. In 2015-2016 he would have a loss. The loss wouldn't be able to be used to offset the $100,000 gain as that gain is in the past, it is in a prior tax year. So poor old John would have to carry forward this loss and hope he can use it in the future (but he has sold all his assets so this may never benefit him). - Also, a capital loss cannot be applied against income. Capital losses can only be applied against capital gains. Example John has an income of $100,000 and a capital loss of $50,000 from shares but no capital gains. John’s taxable income is still $100,000 despite the loss. The loss can be carried forward to future years. - Planning ahead can save you money.