Capital gains, losses and depreciation

Capital gains or capital losses only arise from the disposal (ie. sale) of a depreciating asset.

A gain or loss will only arise to the extent that you have used the asset for a non-taxable purpose (eg. Private purposes).

Capital gains and losses can be calculated using the Guide to Depreciable Assets from the Australian Tax Office

Calculating a capital gain or capital loss for a depreciating asset

You make a capital gain if the sale value of your asset is greater than its cost.

you make a capital loss if a depreciating asset is sold for less than its cost.

different formulas are used to calculate a capital gain or capital loss depending on whether the asset is in a low-value pool or not.

Depreciating asset not in a low-value pool: capital gain

If your depreciating asset is not a pooled asset , you calculate the capital gain as follows:

(termination value – cost)

sum of reductions
total decline

Depreciating asset not in a low-value pool: capital loss

You calculate the capital loss from a depreciating asset that is not a pooled asset as follows::

(cost – termination value)

sum of reductions
total decline

Sum of reductions is the sum of the reductions in your deductions for the asset’s decline in value that is attributable to your use of the asset, or you having it installed ready for use, for a non-taxable purpose.

Total decline is the decline in value of the depreciating asset since you started to hold it.

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Capital gains, losses and depreciation

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