Reduction CGT by Carry Forward Loss (In Company)

Question

Hi Julia,
If Company has a 1.5M carried forward loss (trading loss not capital) and sells a Commercial Rental Property (leased until 2021) with a capital gain (for example of 1M) does the Capital Gain ultimately just get deducted of the C/F trading loss. For example 1.5m minus 1m leaving the 500,000 c/f and no CGT.
I guess the main question I want to confirm is, does a Capital Gain in a Company structure not get isolated for tax purposes and can get offset by any non capital tax losses carried forward from previous years (after applying any available discounts). ie CG (minus discounts if any) minus (capital losses) minus trading loss = taxable income multiplied by 30% (now 28.5%)

Regards
Glen

Answer


Yes that is the great thing about revenue (trading) losses they are not applied to the capital gain until after any capital concessions are used up.
Companies are not entitled to the 50% CGT discount so the only CGT concessions you would be looking to utilise would be the small business active asset concessions and then only if you have used the building in your business or an associates business for half the time the company owned it or 7 ½ years which ever is the shortest period. You also need to have a turnover of less than $2 million or business assets of less than $6 million.

Assuming you do not qualify for the small business active asset concessions then the tax calculation would look like this:

Capital Gain
Less any carried forward or current year capital losses
Less carried forward revenue (trading) losses after already deducting exempt income and current year revenue (trading) profits

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