What is a capital loss and how can it be used?
Understand what makes a capital loss and how it can be used to reduce capital gains.
Summary
A capital loss arises when the reduced cost base of a CGT asset is greater than the proceeds on disposal. Capital losses can only be used to offset capital gains, not other income. Unused net capital losses can be carried forward indefinitely.
What this means
Capital losses are applied against capital gains in the same income year first. If there are more losses than gains, the net capital loss is carried forward to reduce capital gains in future years. There is no time limit on carrying forward capital losses.
Capital losses are applied before the CGT discount. Special rules apply to losses from collectables and personal use assets – these losses can only be used against gains from the same category. Some capital losses cannot be used at all, such as those from personal use assets acquired for less than the relevant threshold.
Typical actions
- Work out capital losses for each CGT event during the year.
- Apply losses against capital gains in the same year first.
- Carry forward any unused net capital loss to future years.
- Apply losses to gains before the CGT discount.
- Keep records supporting each loss for as long as it may be used.
Official ATO sources
Last checked: 25 August 2026
Using capital losses to reduce capital gains
Explains how capital losses offset capital gains and how carry-forward works.
How to calculate your CGT
Step-by-step CGT calculation showing where losses are applied.
Related questions
- What is the CGT discount and how does it work?
- What is cost base for CGT purposes?
- How does capital gains tax work?
- What records should investors keep for CGT?
Important notice: Tax Clarity is an independent information tool. This page provides general information based on official sources. It does not provide tax, legal, financial, or accounting advice. Tax rules can change, and how they apply depends on your circumstances. For advice about your situation, speak with a registered tax agent or qualified professional.
Need help understanding this in plain English?
Try the Tax Clarity App for a plain-English answer.