Generally, you make a capital loss if your reduced cost base is greater than your capital proceeds. The excess is your capital loss.
Example: Capital loss from a new income-producing asset
Antonio acquired a new income-producing asset on 28 September 1999 for $100,000. He sold it for $90,000 in November 2003. During the period he owned it, he was allowed capital works deductions of $7,500. Antonio works out his capital loss as follows.
Cost base |
$100,000 |
less write-off deduction |
$7,500 |
Reduced cost base |
$92,500 |
less capital proceeds |
$90,000 |
Capital loss |
$2,500 |
End of example
Example: Capital loss from holding and selling shares
In July 1996, Chandra bought 800 shares at $3 per share. He incurred brokerage and stamp duty of $100. In December 2003, Chandra sold all 800 shares for $2.50 per share. He incurred brokerage of $75. He made a capital loss, calculated as follows.
Calculation of reduced cost base
Date expense incurred |
Description of expense |
Expense |
---|---|---|
July 1996 |
Purchase price |
$2,400 |
July 1996 |
Brokers fees and stamp duty |
$100 |
December 2003 |
Brokers fees |
$75 |
Reduced cost base |
- |
$2,575 |
Calculation of capital loss
Reduced cost base |
$2,575 |
Capital proceeds 800 × $2.50 |
$2,000 |
Capital loss |
$575 |
End of example
However, the reduced cost base is not relevant for some types of CGT events. In these cases, the particular CGT event explains the amounts to use (see appendix 1: Summary of CGT events).
Reduced cost base
You cannot index a reduced cost base.