CGT on sale

[Burramys]

The years are correct but I've simplified the dollars. An asset was acquired in May 2000 for $1000 including costs. The asset was sold in May 2014 for $5000 after costs. It appears that the best method of calculating CGT is the discount one. So, $5000 less $1000 = $4000/2 for 50% = $2000 CG. This is then applied to previous capital loss.

However, I am advised differently: $5000 less $1000 = $4000 CG, and this is applied to cap loss. This advice is from an accountant.

Advice is sought. Is the first method correct, the second, both, or is there another way? Many thanks.

 

[Terry_w]

losses are used up before the discounting.

 

[Burramys]

losses are used up before the discounting.

There are no losses for FY14, but there are losses carried forward from FY13. It's unclear which ones apply.

Using the example above, if there was $400 cap loss from FY 13 then the total may be $4000 CG for FY14 less $400 from FY13 = $3600, with the 50% rate applied to this giving $1800 FY14 CG.

Another scenario. FY14 has $4000 CG from one asset and a $500 cap loss from another. Add these to get net FY14 $3500 CG, and then add in FY13 cap loss carried forward, $400, to give $3100 CG for FY14. this is then halved to give $1550 FY14 CG.

Is the maths correct?

 

[Paul@PFI]

Calculate the total current year asset capital gain first. $5-$1 = $4
Then deduct current year losses. $0
Then deduct PY losses (not discounted !!) ie $4K - $

The resulting net gain may then be eligible for the 50% discount. ie $3600 /2 = $1800

 

[Terry_w]

There are no losses for FY14, but there are losses carried forward from FY13. It's unclear which ones apply.

All losses apply.

 

[Paul@PFI]

AND if you have c/fwd income tax losses they apply AFTER the CGT losses.

 

[Burramys]

Thanks, sorted.