Question

Jason, an Australian resident for tax purposes, has carried forward ordinary capital losses from the year ended 30 June 2017 of $8,000 and carried forward collectable losses of $4,000 from the year ended 30 June 2016. On 22 October 2019 he sold land for $76,000 that he purchased on 7 March 2014 for $44,000. He also sold an antique on 12 February 2020 for $3,000 that he purchased for $800 on 8 December 2008.

What is his net capital gain or loss for the year ended 30 June 2020? How are gains or losses treated with respect to taxable income. Use the above data to explain the treatment of different classes of gains and losses.

Answer 1

Carried forward capital losses are allowed to be set off from capital gains

Carried forward collectable losses are also classified as capital losses and are also eligible to be set off from capital gains

solution part

Sale value of land = $76,000

Less: cost of acquistion = $44,000

Less: Capital losses = $8,000

Capital gain on land = $24,000

for antique sale

Sale value of antique = $3,000

Less: cost of aquisition = $800

Less: losses of collectable = $2,200 (maximum allowed to be deuct is upto the value of capital gain)

Capital gain on antique = Nil

Carry forward of collectable losses = $4,000 - $2,200

= $1,800