Capital Loss
A loss made when you dispose of a CGT asset for less than its cost base — can offset capital gains but not other income.
A capital loss occurs when the capital proceeds from disposing of a CGT asset are less than its reduced cost base. Capital losses can only be used to offset capital gains — they cannot be deducted against other types of income such as salary, interest, or rental income. If your capital losses exceed your capital gains in a financial year, the excess is carried forward indefinitely to offset future capital gains.
When applying capital losses, you must first offset them against capital gains before applying the 50% CGT discount. This maximises the benefit of the losses. For example, if you have a $20,000 capital gain (held >12 months) and a $10,000 capital loss, you first apply the loss ($20,000 - $10,000 = $10,000 net gain), then apply the 50% discount ($10,000 × 50% = $5,000 assessable). Don't apply the discount first.
Capital losses on personal-use assets (items costing $10,000 or less, such as household items, boats, or furniture) and collectables cannot be offset against gains from other types of assets. Losses on shares in companies that have become worthless can also be claimed, but you need to be able to demonstrate the shares have genuinely become worthless (e.g., the company has been wound up).