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Edited version of private ruling
Authorisation Number: 1011601244283
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Ruling
Subject: Capital gains tax - investment scam - fraud
Question: Has a capital gains tax event occurred so that you can claim a capital loss from your fraudulent investment?
Answer:
No.
This ruling applies for the following period:
Year ended 30 June 2010.
The scheme commences on:
1 January 2010.
Relevant facts and circumstances
Relevant facts
Sometime in the recent year you and your spouse became clients of a certain company.
The company was a supposed futures trading company.
You and your spouse intended to invest a significant amount of money in gold options with an expiry date of prior to 30 June in the recent year.
Not long after your initial investment you were advised by the relevant authorities who informed you and your spouse that the company that you had invested in was a fraudulent company and that you had lost all of the money you had invested with them.
You have included copies of relevant documents, these documents form part of and are to be read with these facts.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 102-20,
Income Tax Assessment Act 1997 Section 104-25,
Income Tax Assessment Act 1997 Section 108-5 and
Income Tax Assessment Act 1997 Section 110-55.
Reasons for decision
Summary
A capital gains tax event has not occurred, therefore you cannot claim a capital loss from your fraudulent investment.
Detailed reasoning
A capital gain or capital loss can only be made if and only if a CGT event happens. The capital gain or capital loss is made at the time of the CGT event.
In your case your CGT asset is not gold options as you never acquired any gold options. You were advised by the relevant authorities that the actual existence of financial products is fraudulent, not legitimate.
Your CGT asset is the right to sue the company (to seek compensation for your financial loss).
The CGT event that may be relevant in this situation is CGT event C2 - cancellation, surrender and similar endings. CGT event C2 occurs if the CGT event ends by cancellation, surrender, redemption, release, discharge, satisfaction, abandonment or forfeiture of an intangible CGT asset.
As you are unable to establish that any of these actions have occurred in relation to the right to sue, CGT event C2 has not occurred at this time. You therefore have not made a capital loss at this time.
Note: You may make a capital loss in the future when CGT event C2 occurs. For example if you officially abandon your right to sue the company for the amounts invested with them.
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