Capital loss tax calculation

gsp77 · 12 May 2021

Hi
Currently I am working part time. I made a profit of selling a share $5000 and loss of $3000 on other share. Both bought and sold in same year. My annual income is less then $18000 even after including $5000 profit. I didn’t deducted $3000.I will not be paying tax this year as my taxable income is below $18200. Can I carry forward my capital loss $3000 for later year and deduct from capital gains when I have more income?
Can I able to choose which year to deduct capital loss to get maximum tax reduction?

Thanks a lot for the help.

Gunnerguy · 12 May 2021

I believe Capital losses can be carried forward for as long as you want. I have done this for years. Not sure if you can choose to use them when you want but if you have no tax to pay your losses are just held on account until you want to use them.
With no wage income, I manage my CGT exposure based on my dividend income. I try to match franking credits against CGT gains. I hold shares/ETF’s long term and take (cash in) gains in portions of my portfolio when I need money. With some of my ETF’s showing losses I also sometimes cash these in to offset losses against gains to reduce tax.
For example I have some large losses in FLT and with international flights not opening till next year I may realise my FLT losses whilst at the same time cashing in some good performing ETF’s.

Gunnerguy

Craton · 12 May 2021

Short and Long term gains/losses are treated differently.
From memory, Short term events needed to be accounted for in the income year of the gain/loss and, unlike Long term gains/losses, can not be carried forward

Link: From the NAB bank site:
If you sell or dispose of your capital gains tax assets in less than 12 months you’ll pay the full capital gain tax. But, you (as an individual) could get a 50% discount on your capital gain (after applying capital losses) for any capital gains tax asset held for over 12 months before you sell it.

ATO Capital Gains

dyna · 12 May 2021

You really should use up your CL's (against your capital gains) and not carry them forward for too many years.Back in the high inflation days(anybody alive,remember them?) capital losses would lose their value over time.
It may be better to not run the risk of generating CL's at all, by not speculating on individual companies(especially the penny- dreadfuls) but stick to ETF's for now,until you have a higher tax liability.

gsp77 · 12 May 2021

Gunnerguy said:
I believe Capital losses can be carried forward for as long as you want. I have done this for years. Not sure if you can choose to use them when you want but if you have no tax to pay your losses are just held on account until you want to use them.
With no wage income, I manage my CGT exposure based on my dividend income. I try to match franking credits against CGT gains. I hold shares/ETF’s long term and take (cash in) gains in portions of my portfolio when I need money. With some of my ETF’s showing losses I also sometimes cash these in to offset losses against gains to reduce tax.
For example I have some large losses in FLT and with international flights not opening till next year I may realise my FLT losses whilst at the same time cashing in some good performing ETF’s.

Gunnerguy

So if my taxable income next year 21-22 for example $ 40000 and 22-23 is $140000 can I deduct $3000 capital loss from 22-23 capital gain to take maximum tax reduction?
Thanks

So_Cynical · 12 May 2021

Doing your own tax - The loss has to be declared and carried forward, that way it will automatically show up next year.

qldfrog · 12 May 2021

I do not believe you have the choice, if already sold you had a cg of $5k and another of -$3k so overall gain of 2k which will be taxed this FY.
I do not believe you can pick and choose the year once the CG event(Sale) is completed.
That assumes you bought and sold within 12months

If you kept the shares giving you the 5k profit more than 12 months then you will pay capital gain on: from memory $(5-3=2k/2 or $1k..and NOT $5k/2 -3k
so no loss anyway
Confirm with accountant, that's my understanding

gsp77 · 12 May 2021

qldfrog said:
I do not believe you have the choice, if already sold you had a cg of $5k and another of -$3k so overall gain of 2k which will be taxed this FY.
I do not believe you can pick and choose the year once the CG event(Sale) is completed.
That assumes you bought and sold within 12months

If you kept the shares giving you the 5k profit more than 12 months then you will pay capital gain on: from memory $(5-3=2k/2 or $1k..and NOT $5k/2 -3k
so no loss anyway
Confirm with accountant, that's my understanding

If my total income is less than $18200 for that year still I can’t move the capital loss to some other year?

peter2 · 12 May 2021

Check for yourself or better, check with a tax specialist.

qldfrog · 12 May 2021

gsp77 said:
If my total income is less than $18200 for that year still I can’t move the capital loss to some other year?

as per Peter answer above: no,
but if you were to have an overall loss (not the case based on your description), the CG loss will be pushed to next year to offset any future CGT

gsp77 · 12 May 2021

Thank you all for the details

barney · 13 May 2021

qldfrog said:
as per Peter answer above: no,
but if you were to have an overall loss (not the case based on your description), the CG loss will be pushed to next year to offset any future CGT

Hi @gsp77 Its a bit of a grey area trading and tax so as most have said, get the appropriate advice from a professional

My interpretation fwiw,

You should be able to defer the $3K loss because your Taxable Income was less than a taxable bracket ($18,200)

Had you made for eg. $19K for the year, my interpretation is you could then could use part of the losing trade to bring your Income back to $18,200 threshold, and defer the remainder till the following year

More importantly, what may affect any or all of the above is how the Tax Dept perceives your trading exploits?

ie. Are you a Trader or Investor etc

Cheers.

Below from the Oz ATO:- (ATO info)

And this:- (Capital Losses)

qldfrog · 13 May 2021

barney said:
Hi @gsp77 Its a bit of a grey area trading and tax so as most have said, get the appropriate advice from a professional

My interpretation fwiw,

You should be able to defer the $3K loss because your Taxable Income was less than a taxable bracket ($18,200)

Had you made for eg. $19K for the year, my interpretation is you could then could use part of the losing trade to bring your Income back to $18,200 threshold, and defer the remainder till the following year

More importantly, what may affect any or all of the above is how the Tax Dept perceives your trading exploits?

ie. Are you a Trader or Investor etc

Cheers.

Below from the Oz ATO:- (ATO info)

View attachment 124222

And this:- (Capital Losses)

View attachment 124223

Mr @barney
gsp quoted:
I made a profit of selling a share $5000 and loss of $3000 on other share
in that case, as far as I know, there is no choice, there is a win of 2k.
No way around.
If you held that share packet for more than 12 omth, you can be taxed on only half of the CG. but that's it
if there was only a capital loss, or an overall capital loss, yes you may be able to offset next year
please DIYR/see an accountant, here it is clear cut with no flexibility IMHO
hope it helps

barney · 13 May 2021

qldfrog said:
Mr @barneygsp quoted:I made a profit of selling a share $5000 and loss of $3000 on other share
in that case, as far as I know, there is no choice, there is a win of 2k.
No way around.

I confess Frog, that was my first impression also, and I believe after further investigation, you are correct.

When I read the ATO descriptions, I wondered whether the variations of being under the tax threshold etc might alter the possibilities?

Fortunately, its been many years since I had the displeasure of claiming a "Tax Loss" as opposed to a "Capital Loss"

ie. To claim a deferred tax loss, your yearly taxable deductions must exceed your yearly income

Sorry if I gave false hope @gsp77 In Australia, you can earn $18,200 and pay zero tax with the Gov's blessing

But if you earn between $18,200 and $0 you are well and truly on your own

Still best to get advice to confirm you personal circumstances of course, but,

It seems your $3K loss will likely be tallied in the years Income journal in the "experience" column

Cheers

polpak · 16 May 2021

It is worth considering the ATO information:

https://www.ato.gov.au/general/capi...ng-as-investor-or-share-trading-as-business-/

Shareholding as investment

A shareholder is a person who holds shares for the purpose of earning income from dividends and similar receipts. For a shareholder:

the cost of purchase of shares is not an allowable deduction against current year income, but is a capital cost

receipts from the sale of shares are not assessable income – but any capital gain on the shares is subject to capital gains tax

a net capital loss from the sale of shares can't be offset against income from other sources, but can be offset against another capital gain or carried forward to offset against future capital gains

the transaction costs of buying or selling shares is not an allowable deduction against income, but are taken into account in determining the amount of any capital gain

dividends and other similar receipts from the shares are included in assessable income

costs (such as interest on borrowed money) incurred in earning dividend income are an allowable deduction against current year income.

Share trading as business

A share trader is a person who carries out business activities for the purpose of earning income from buying and selling shares. For a share trader:

receipts from the sale of shares constitute assessable income

purchased shares are regarded as trading stock

costs incurred in buying or selling shares – including the cost of the shares – are an allowable deduction in the year in which they are incurred

dividends and other similar receipts are included in assessable income.

https://www.ato.gov.au/general/capi...trading-as-business-/#Amountofcapitalinjected

Amount of capital invested

The amount of capital that you invest in buying shares is not considered to be a crucial factor in determining whether you're carrying on a business of share trading.

This is an area in which it is possible to carry out business activities with a relatively small amount of capital. Conversely, you may also invest a substantial amount of capital and not be considered to be a share trader.

Capital loss tax calculation

gsp77

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