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  • Investments in a company in liquidation or administration

    You may be able to realise a capital loss on worthless shares before a company is dissolved if a liquidator or administrator declares in writing that there is no likelihood you will receive any further distribution in the course of winding up a company.

    Financial instruments relating to a company can also be declared worthless by a liquidator or administrator.

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    Shareholders and investors

    You may be able to claim a capital loss if you're:

    • a shareholder, and a liquidator or an administrator of a company declares in writing that they have reasonable grounds to believe there is no likelihood that shareholders will receive any further distribution for their shares
    • an investor who holds a financial instrument in a company, and the liquidator or administrator of the company makes a declaration in writing that the financial instrument has no value or negligible value. Such financial instruments may include  
      • convertible notes
      • debentures
      • bonds
      • promissory notes
      • loans to the company
      • futures contracts
      • forward contracts and currency swap contracts relating to the company
      • rights or options to acquire any of these, including rights or options to acquire shares in a company.

    Liquidator or administrator's role

    The decision about whether or not to make a declaration, and the time at which to make it, rests solely with the liquidator or administrator. They can make written declarations in relation to shares and financial instruments in the same statement – for example, a declaration in relation to a share and an option to acquire a share.

    You can't claim a capital loss for a financial instrument, such as a right or option to acquire a share, if a liquidator or an administrator declares they consider the shares are worthless but does not make a declaration that they consider the financial instrument is of no value or has only negligible value.

    When you can't choose to make a capital loss

    You can't choose to make a capital loss for:

    • a financial instrument where any profit made on the disposal or redemption of it would be included in your assessable income or any loss would be deductible – such as a traditional security or qualifying security
    • a unit in a unit trust or a financial instrument relating to a trust
    • certain interests acquired under employee share schemes.
      Last modified: 01 Jul 2022QC 52234