Dear ATO community,
I have a technical question regarding the CGT discount which is not covered in the "CGT discount" page.
To my understanding the 50% CGT discount applies to assets held for over 12 months, and you are an Aus resident. Furthermore, capital losses from prior years must be deducted first.
However, this raises the question of what if one has capital losses carried over from prior years and disposes a combination of CGT discount eligible assets and non CGT discount eligible assets in a given financial year.
Take example of person A.
- Person A has a combined capital loss of $5000 carried over from previous few years.
- Person A has sold Stock 1 this financial year, which he held for 3 weeks, netting a $5000 profit
- Person A also sold Stock 2 this financial year, which he held for over 1.5 years, netting a $10,000 profit (CGT discount eligible).
In the case of person A, if he cancels out the profit from Stock 1 with his prior capital losses, then his taxable income will only be $5000 ($10000/2).
However, if the capital loss was deducted from Stock 2, then his taxable income will be $7500 [($10,000 - $5000) /2] + $5000.
I guess my question is what is the "correct" way to calculate your tax obligations in a situation like this.
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