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
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%).
e.g. Buy for $300,000
Sell for $300,000Cost 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://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
For what time period can a loss be carried forward? Is there a limit of financial years?
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://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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?
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.htmlThis lists out the things you can claim.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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