All Topics / Legal & Accounting / Capital Gains/Loss Calculation?

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• ijc
Participant
@ijc
Join Date: 2002
Post Count: 28

Hello- Could somebody share with me the formula for calculating capital gains tax. A ‘real life’ example would be great as it will help me better understand the inputs, especially if their is financial jargon involved . It looks like I may have to sell my investment property at a loss, so wondering if I can carry a loss forward indefinitely, and deduct from any future capital gains on another investment property when sold? Thanks

tanner892
Participant
@tanner892
Join Date: 2013
Post Count: 25

Yes that’s exactly what you can do, so for example; if you buy a house for for \$300k and sell for \$200k you will have a carry forward capital loss of \$100k. Now in the future if you buy another house for let’s say \$400k and sell it later on for \$600k (and owned it for over 12 months) You would have a Net Capital Gain of \$50k (600k – 400k – 100k <-CFL x 50%).

Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,190

Sell for \$300,000

Cost base is \$300,000 plus all costs not claimed such as stamp duty, lawyer fees, estate agent commission etc.

This could be say \$40,000 So you would suffer a capital loss of \$40k in this example. This cannot offset income but can offset future capital gains.

Losses are applied before the 50% discount too

So \$40k carried forward as a loss.

You then make \$80,000 in capital gains for shares held more than 12 months

The loss is applied first so the gain will be \$40k then the 50% discount making the gain \$20k and this is added to your other income.

Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://structuring.com.au/
Email Me

Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

Solomon10
Participant
@solomon10
Join Date: 2010
Post Count: 135

For what time period can a loss be carried forward? Is there a limit of financial years?

Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,190

Generally until death, but only in the final tax return. If your estate sells a property the loss won’t offset the gain.

There are also various rules about carrying forward losses, especially in trusts.

Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://structuring.com.au/
Email Me

Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

ijc
Participant
@ijc
Join Date: 2002
Post Count: 28

Thnx all for your contributions. Terryw could you please elaborate on:”Cost base is \$300,000 plus all costs not claimed such as stamp duty, lawyer fees, estate agent commission etc.” I would like to know exactly what costs I can claim in the cost base so I can do a calculation. Are any of the selling costs like REAgent’s fees included?

Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,190

Thnx all for your contributions. Terryw could you please elaborate on:”Cost base is \$300,000 plus all costs not claimed such as stamp duty, lawyer fees, estate agent commission etc.” I would like to know exactly what costs I can claim in the cost base so I can do a calculation. Are any of the selling costs like REAgent’s fees included?

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Easier to look directly at the relevant law:
http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s110.25.html

This lists out the things you can claim.

Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://structuring.com.au/
Email Me

Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

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