Private ruling: Capital gains tax - Carried forward capital losses.
Published: July 2011
Ruling period: Year ending 30 June 2012, and | Year ending 30 June 2013.
Date scheme commenced: 1 July 2011.

Ruling: Q1: Is the capital loss made in a previous year available to be carried forward to offset against future capital gains? | A1: Yes.

Relevant facts and circumstances: You have reported carried forward capital losses in previous income years. As at 30 June 2010 the capital loss carried forward as reported by you was substantial. Initially this capital loss was calculated by your previous tax agent. You have stated that the former liquidator currently holds all records to verify the capital loss made and you are in the process of retaining these records. Assumption This ruling is based on the assumption that you retain all the records to verify the capital loss.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-15 and | Income Tax Assessment Act 1997 Section 104-15.

Reasons for decision: Summary: Generally, you make a capital loss if your reduced cost base is larger than your capital proceeds. The excess is your capital loss. Current year capital losses can be applied against any capital gains made during an income year to determine a net capital gain or net capital loss. A net capital loss that cannot be applied in an income year can be carried forward to a later income year. In other words, net capital losses can continue to be carried forward indefinitely and used to reduce future capital gains. In respect of your capital loss, it is sufficient to keep records of the capital loss with your taxation records and carry it forward until such a time as you have a capital gain to offset it against. It should be noted that, taxpayers must keep records of everything that affects their capital gains and capital losses. If a net capital loss is made, taxpayers must maintain records for five years after any capital gain is reduced by applying that capital loss.

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