It’s also possible to make a capital loss on investments.
Simply, this is where you sell an investment for less than its cost.
A capital loss reduces any taxable capital gains you have made but cannot be claimed as a tax deduction or offset against other assessable income.
If there are no capital gains in the same year as the loss, the capital loss can be carried forward to offset against any capital gains made in future years. The capital loss can be carried forward indefinitely.
Importantly, the loss can only reduce the gross capital gain. This means, if the loss was on an investment owned by you the loss reduces any gross capital gain from other investments before the discount is applied.
Individuals are entitled to a 50% discount on capital gains made. Other entities are subject to different rates of discounts as discussed below. The relevant discount is applied to the net capital gain – this is the gross gain less the loss.