Using Capital Losses to Reduce Your CGT
Capital losses can offset capital gains, reducing your tax bill. If you sell assets at both a profit and a loss in the same year, the loss reduces the taxable gain—potentially to zero.
This calculator shows the tax outcome of each sale individually. In practice, when you lodge your tax return, your total capital losses are subtracted from your total capital gains before any tax is calculated.
Why this matters
If you have underperforming investments, selling them at a loss isn't just cutting your losses—it can save tax on your winning positions. This strategy, sometimes called "tax loss harvesting," is particularly useful before the end of the financial year.
The key rule: capital losses can only offset capital gains. They cannot reduce your regular income (salary, dividends, interest). Any unused losses carry forward indefinitely to future years.
What most people get wrong
Applying losses to the discounted gain. Losses are applied to the gross capital gain first, before the 50% discount is calculated. So a $10,000 loss offsets a $10,000 gain entirely—not just $5,000 of the discounted amount.
Thinking losses reduce other income. Capital losses only offset capital gains. If you have no gains this year, the loss carries forward—it doesn't reduce your salary or other income.
Wash sale confusion. If you sell at a loss and buy back the same or substantially similar asset within a short period, the ATO may deny the loss deduction. The rules target artificial arrangements, not genuine portfolio rebalancing.
Scenario A: Profitable sale (capital gain)
Scenario B: Loss-making sale (capital loss)
Applies to both scenarios
0 months after Scenario A
Scenario A
Profitable sale (capital gain)2025-26 Capital Gains Tax rates
Tax Comparison
Scenario B
Loss-making sale (capital loss)2025-26 Capital Gains Tax rates
Tax Comparison
This calculator provides estimates only and does not constitute financial advice. Actual amounts may vary based on individual circumstances. Consult a registered tax agent for personalised guidance.
How to use this comparison
- Review the pre-filled scenarios — we've set up realistic defaults for comparison
- Adjust the numbers — enter your actual purchase price, sale price, and dates
- Compare the results — see the tax difference highlighted at the top
- Share or bookmark — the URL updates as you change inputs
How Capital Gains Tax Works
When you sell an asset for more than you paid, the profit is a capital gain. In Australia, this gain is added to your taxable income and taxed at your marginal rate. The amount of tax you pay depends on your total income that year, how long you held the asset, and whether any exemptions apply.
Key factors affecting your CGT
- Holding period: Assets held for 12+ months qualify for the 50% CGT discount, halving your taxable gain
- Your income: Higher income means a higher marginal tax rate on your capital gains
- Asset type: Your main residence is generally CGT-free; investment properties and shares are not
- Cost base: Includes purchase price plus costs like stamp duty, legal fees, and improvements
Use the calculator above to model your specific situation. Adjust the inputs to see how different scenarios affect your tax outcome.
FAQ
How do capital losses reduce my CGT?
Capital losses are subtracted from capital gains when you lodge your tax return. If you made $30,000 in gains and $10,000 in losses, you only pay CGT on the net $20,000 gain. The 50% discount (if eligible) is then applied to this net amount.
Can I use losses from previous years?
Yes. If you had capital losses in prior years that you couldn't use (because you had no gains), they carry forward indefinitely. You can apply them against gains in any future year.
Are losses applied before or after the 50% discount?
Before. Current-year losses and carried-forward losses are deducted from gross capital gains first. The 50% discount is then applied to the net gain. This makes losses more valuable than they might first appear.
Can I claim a capital loss against my salary?
No. Capital losses can only offset capital gains, not other income like salary, dividends, or interest. If your losses exceed your gains, the excess carries forward to future years.
What is a wash sale?
A wash sale is when you sell an asset at a loss and buy back the same or substantially similar asset shortly after, primarily to claim the tax loss while maintaining your investment position. The ATO may deny the loss deduction if the arrangement lacks genuine commercial purpose.
Should I sell losing investments just for the tax benefit?
Tax shouldn't be the only reason, but it's a valid consideration. If you were going to sell anyway, timing it to offset gains makes sense. But don't sell a good long-term investment just for a short-term tax benefit.
Disclaimer
This tool provides estimates only and does not constitute financial advice. Investment decisions should not be based solely on tax considerations. Market conditions, investment goals, and personal circumstances all play a role.
Before making decisions about selling assets, consult a registered tax agent or licensed financial adviser.