I know this is probably Taxation 101 for most of you here, but I'm just trying to get clear in my head the way Capital Gains are treated by the ATO against past Capital Losses.
Here's my hypothetical:
I buy shares in Company A for $20,000 in 2005.
It tanks and in 2010, I sell them for $10,000, and report a $10,000 Capital Loss on my tax return and carry it forward in ongoing years.
In 2015 I take my $10,000 and buy shares in company B. It goes gangbusters, and in 2018 I sell them for $40,000.
I have my $10,000 back, plus a $30,000 Capital Gain.
In my 2015/6 tax return, because I held the shares in Company B longer than 12 months, it is eligible for a 50% discount, I report the Capital Gain as $15,000, but because I am carrying at Capitol Loss of $10,000 from 2010, the actual taxable component is just $5,000.
So I have $10,000 of my original Capital, plus $30,000 in gains, and a $5,000 tax bill (@37c notionally $1850).
This equates to $20,000 in original Capital plus $18,150 after tax profit.
If I had not made that previous loss, and broken even with Company A, with no CGT loss carried forward, I'd have my initial $20,000 back, and a Capital Gain of $15,000 but pay tax on the full $15,000, or $35,000 plus a $15,000 tax bill (@37c notionally $5,550)
This equates to $20,000 in original Capital plus $9,450 tax paid profit.
Is that correct, or am I missing something?
If it is, is it not then worthwhile to make a capitol loss on a percentage of a portfolio to minimise tax paid?
