Reducing capital gains tax

Did you know you can reduce your capital gains tax (CGT) bill by offsetting your capital gains with capital losses? Here’s how it works:

1. Offsetting with Past Losses: Start by using any capital losses you’ve carried forward from previous years. These losses will help reduce your current year’s capital gains. If your past losses wipe out your current gains completely, you can carry over any remaining losses to offset future gains.

2. Choosing Which Gains to Offset: You have the flexibility to choose which capital gains you want to offset with your losses. Prioritize gains that are not eligible for the CGT discount first to maximize your CGT reduction. Note: Gains from collectables (e.g., artwork, jewelry, antiques) can only be offset with losses from collectables.

3. Limitations on Offsetting: Be aware that you cannot use capital losses to offset gains from:
– Personal use assets like boats or furniture
– CGT exempt assets such as cars and motorcycles
– Collectables costing $500 or less
– Leases unless they are for income-producing purposes (e.g., commercial rental properties)
– Personal services income paid through an entity you’ve set up

For help on navigating CGT, feel free to contact us today!

All information was sourced from ato.gov.au with the aid of ChatGPT.