# Can you claim a capital loss off your salary income?



## Realist (15 June 2006)

Sorry about the lame question.    

But I never actually sell shares. So I don't know.      


Can I sell some of my losers (down about $1000 or so on them) and just claim that off my salary income to reduce my tax?

My tax rate will be lower next year so I may as well do it now.

Bearing in mind the only capital gain I realised this year was a couple of hundred in dividends. I've not sold anything all year. Other shares have gone up of course so I am ahead quite a bit.

I think you can only claim a loss off a capital gain, is that right? So there is no point in me selling really, they are still good companies.

Also I lost about $3000 on some Nasdaq shares in 2001 - can I still claim that loss now, I have yet to claim it.

thanks guys.


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## bullmarket (15 June 2006)

Hi realist

as far as I am aware you can only claim capital losses against other capital gains and not against salaries or other income.

but the capital losses and capital gains don't have to be from the same asset class.....eg...you can claim a $10k capital loss from shares against say a $50k capital gain on an investment property for a nett capital gain of $40k on your tax return.

but as always.....seek you own professional advice from your tax adviser or ATO directly (they don't really bite unless you have something to hide )

cheers

bullmarket


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## mit (15 June 2006)

You can roll capital losses forward into future years to offset future CGs. 

It can be a catch though. You can imagine a hyper dividend stripper who say makes $50k in dividends in a year but has an overall capital loss of say $30k. He looks as though he is $20k ahead of the game but not only can't he claim the capital loss but he has to pay tax on the $50k in dividends.

MIT


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## Realist (15 June 2006)

Thanks guys..

the question then is how long can you save a capital loss before claiming it?

I have one from FY01.


Is it worth me selling some overpriced winners and some duds to cancel out the profit and loss and cash up?


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## lesm (15 June 2006)

Realist,

As bullmarket mentioned you can only offset capital gains against capital losses.

With respect to your unclaimed capital loss realised in 2001 you will need to make a tax amendment to claim this for tax purposes.

You can clarify the situation with the ATO and/or seek the appropriate professional advice.

Cheers


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## bullmarket (15 June 2006)

Hi Realist



			
				Realist said:
			
		

> Thanks guys..
> 
> the question then is how long can you save a capital loss before claiming it?
> 
> ...




there used to be a limit as to how many years you can carry forward a capital loss before using it to reduce a capital gain from somewhere else....I don't know if that time limit still exists   

maybe see your tax agent or have a browse at the ATO website where there is a truck load of info.

cheers

bullmarket


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## SharonK (15 June 2006)

In relation to claiming a capital loss from 2001 there is no problems with that Losses can be carried forward indeffinitely.  The only time a capital loss is lost is if you die!!  Hopefully that will not happen! 

Also there is no need for amending tax returns, you just bring in the carried forward losses into the capitals gains section of your tax return in the year that you are going to claim them.  They can sit in your tax return each year and are just left unused until you need them.

Hope this helps,

cheers
Sharon


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## 123enen (15 June 2006)

Realist said:
			
		

> Bearing in mind the only capital gain I realised this year was a couple of hundred in dividends.




Money from dividends is not considered a capital gain:This money goes towards income. You cannot claim a capital loss against the dividend.



			
				Realist said:
			
		

> Also I lost about $3000 on some Nasdaq shares in 2001 - can I still claim that loss now, I have yet to claim it.




No problem with 2001 losses, although you really should have brought them foreward each tax year. You can still claim against them, HOWEVER, I have no experience with International assetts(shares) and I am not sure how they fit in with Australian CGT legislation.

You really need to see an accountant!!


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## rozella (15 June 2006)

mit said:
			
		

> You can roll capital losses forward into future years to offset future CGs.
> 
> It can be a catch though. You can imagine a hyper dividend stripper who say makes $50k in dividends in a year but has an overall capital loss of say $30k. He looks as though he is $20k ahead of the game but not only can't he claim the capital loss but he has to pay tax on the $50k in dividends.
> 
> MIT



If you trade this way, you need to make a decision whether you should be classified as sharetrader & not a shareholder.......you can actually be both, with a long term portfolio & a trading portfolio.

A sharetrader does not have CGT as the purchase of the shares is deductable....similar to a shop, buying & selling.  So therefore all profits/losses from trading becomes income just the same as dividends & franking credits .


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## lesm (15 June 2006)

SharonK said:
			
		

> In relation to claiming a capital loss from 2001 there is no problems with that Losses can be carried forward indeffinitely.  The only time a capital loss is lost is if you die!!  Hopefully that will not happen!
> 
> Also there is no need for amending tax returns, you just bring in the carried forward losses into the capitals gains section of your tax return in the year that you are going to claim them.  They can sit in your tax return each year and are just left unused until you need them.
> 
> ...





Think you should obtain either ATO or professional advice on this.

Refer to the URL below related to correcting mistakes, where an item has not have been included in a tax return for a given year.

http://www.ato.gov.au/individuals/c...01/002/009/005&mnu=17848&mfp=001/002&st=&cy=1

The capital loss still needs to be recorded against the year in which it initially occurred, and then it can be carried forward. The relevant information is available on the ATO web site.

It's really just a matter of checking the formalities, as to they apply to capital gains/losses and understanding what is considered a CGT related event.

Cheers


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## Realist (15 June 2006)

> No problem with 2001 losses, although you really should have brought them foreward each tax year. You can still claim against them, HOWEVER, I have no experience with International assetts(shares) and I am not sure how they fit in with Australian CGT legislation.
> 
> You really need to see an accountant!!




Hmm thanks Sharon.  I will see an Accountant this year.  

I have never actually made a capital gain in my life, I just sit on my shares and buy more.  A true buy and hold investor if ever there was one.

I will need to sell some Nasdaq shares next financial year though. And some options.  I'm waiting till at least July 1st though because my tax rate will be much lower next year. I'll offset some old losses against them as well.  I don't like paying tax on shares - hence why I don't sell.     

But these shares are growing too much and becoming overvalued and too much of my portfolio, I need to cash in. 



Okay next question - can you hold brokerage fees from one year over to the next, forever?


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## Crazy Shark (15 June 2006)

I am a chartered accountant, registered tax agent and active trader. Email the specific details and I will advise you correctly

accountant.tax@gmail.com


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## SharonK (15 June 2006)

sorry just to clarrify, I assumed your capital losses were Australian and were correctly included in your tax return in 2001, if they were not then yes you will need to amend your 2001 income tax return.

Also given that you are not a share trader your brokerage fees form part of your cost base of your shares when initially purchased and are taken into account when calculating any gains made when you do eventually sell.

I'm not 100% sure if capital gains from foreign shares are treated the same, I would of thought not but maybe crazy shark can answer that one?

I will be interested in the answer

cheers
Sharon


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## Kipp (15 June 2006)

Nice thread... I have been wondering the same question as Realist in the last few months- cause I am in the same boat next year I'll making <$20K so I'll only be CGT at 15%- as opposed to 30% this year.

So I have also been assuming that people tend to sell their dogs (shares that have recently crashed) in June, and conversely- hold off selling their profitmakers till July (to defer tax for another year).
Subsequently, I think there is probably a further "mini-crash" or shares which have just gone cactus (eg the Zinc boys) in June, a everyone rushes to offload their losses before June 30.  Is this true or am I talking crap???

If you think the issue of CGT is a fickle one.  *THere is a good example made in "the Warren Buffet Portfolio".*
Example.  You invest $1000 in a stock which doubles every year.  (i.e.  ZFX)
Trader 1 sells and buys back each year... paying 30% CGT on his profit of 1000 (i.e. $300) and then reinvests the $1700 back in the stock.

Trader 2 keeps the stock and doesn't realise his Capital Gain until year 10.

After 10 years Trader 1 has $201, 500.  And Trader 2 has $716,800...
Ok, unrealistic example?  Well sure, no stock double up every year.. if we use a more conservative 18% p.a. we get $3,276 vs. $3,963---- still a handy margin by deffering your capital gains (plus the added advantage of no brokerage fees)


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## Kipp (15 June 2006)

Crazy Shark said:
			
		

> I am a chartered accountant, registered tax agent and active trader. Email the specific details and I will advise you correctly
> 
> accountant.tax@gmail.com



Whoa... a chartered accountant offering FREE advice!!!  You are crazy!!!

Em, sharon & sharky- am I right in assuming that if you work 3 months in Australia then work 9 months overseas (i.e. remainer of the financial year) you only pay tax to the ATO on your AUSTRALIAN income (but yet are still entitled to the full $6000 tax free threshold).

I'm sure I'm not the first to try and pull this off.  But I think it's pretty unfair that the ATO could tax your on foreign income (while you;re living OS).
Thanks.


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## crackaton (15 June 2006)

Is this where dual residency comes into play? I am thinking of becoming a residence of Paraguay or Brazil where no tax applies.


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## Crazy Shark (16 June 2006)

Kipp..First rule is the Australian Tax Office can do whatever it likes. Second rule is if you are a resident of Australia for tax purposes (as opposed to being a resident for any other purpose) they will tax you on your WORLDWIDE income. 

Crackaton. They (the ATO) don't care how many dual residencies you have. If you are a tax resident of Australia they will tax you


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## wayneL (16 June 2006)

Crazy Shark said:
			
		

> Kipp..First rule is the Australian Tax Office can do whatever it likes. Second rule is if you are a resident of Australia for tax purposes (as opposed to being a resident for any other purpose) they will tax you on your WORLDWIDE income.
> 
> Crackaton. They (the ATO) don't care how many dual residencies you have. If you are a tax resident of Australia they will tax you




bastids!


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## SharonK (16 June 2006)

Gidday All,

Just phoned ATO to check on the treatment of Capital Gains on disposal of Foreign shares and per the ATO they are treated as Capital Gains for Australian Tax purposes, and therefore entered at item 17and any foreign tax credits attached go at item 19.  So my understanding is that foreign capital gains are treated the same as Australian Capital Gains and therefore entitled to the same exemptions regarding the 50% exemption.

Mind you the ATO also tried to tell me that the 50% exemption only applied to property owned and therefore not to shares and I know for a fact that is #%!@!  so can't always beleive what the ATO tells you, not the first times I've had mixed answers from them either.

cheers
Sharon


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## Realist (16 June 2006)

My problem is fixed!!

My shares have gone up so much in past 2 days I'm well ahead and have nothing to claim.

:casanova:


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## NettAssets (16 June 2006)

Realist said:
			
		

> My problem is fixed!!
> 
> My shares have gone up so much in past 2 days I'm well ahead and have nothing to claim.
> 
> :casanova:




I need your stragety
an unrealized gain today wipes out a realized loss from 01 
Hope my bank manager sees it that way it'l wipe off a lot of interest !


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## Odduna (16 June 2006)

SharonK said:
			
		

> Gidday All,
> 
> Just phoned ATO to check on the treatment of Capital Gains on disposal of Foreign shares and per the ATO they are treated as Capital Gains for Australian Tax purposes, and therefore entered at item 17and any foreign tax credits attached go at item 19.  So my understanding is that foreign capital gains are treated the same as Australian Capital Gains and therefore entitled to the same exemptions regarding the 50% exemption.
> 
> ...





The above information is correct.

Foreign sourced capital gains are treated just like Australian sourced capital gains. There is no special spot in the tax returns so far to seperate the two. As such, they are declared at Item 17 in the tax return.

Regarding the 50% discount rule. The rule applies to foreign source and australian sourced capital gains, as well as to non residents and residents taxpayers (referring to individua taxpayers). 

The main provision in the legislation is that you need to be a natural being (section 995-1 of the ITAA 1997) to qualify. So as long as you are not Pammy Anderson, you should be fine (ps cant take credit for last line - that's what the ATO person said to me!)


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