Tax losses and CGT

Most taxpayers would be aware that capital losses can be offset against subsequent capital gains when calculating CGT liability.

However an important point to be aware of is that capital losses of an individual taxpayer are lost on that taxpayer’s death.

The effect of this is that the taxpayer’s estate, when it sells an investment property and makes a capital gain will not be entitled to offset the taxpayer’s previous capital losses.

People giving advice in relation to estate planning need to be conscious of this at all times. Where a taxpayer has significant tax losses, achieving the best tax effective result will be for the taxpayer to sell the income producing property while he or she is still alive, and reduce the capital gains tax by using up the available capital losses.