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Edited version of private ruling

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Ruling

Subject: Capital gains tax - capital loss

Question 1

Has a capital gains tax event taken place to enable you to make a capital loss when a company of which you are a shareholder has voluntarily applied to the Australian Securities & Investments Commission (ASIC) for voluntary deregistration, but has not yet been deregistered?

Answer

No.

Question 2

Has a capital gains tax event taken place to enable you to make a capital loss when a company of which you are a shareholder has voluntarily applied to ASIC for voluntary deregistration and has subsequently been deregistered?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 2011

The scheme commenced on:

1 July 2010

Relevant facts and circumstances

You purchased a share (jointly with your spouse) in an Australian public company (company A) after 20 September 1985.

You applied for this share via a public prospectus.

An application for voluntary deregistration was made by the company in the X income year and it was deregistered by ASIC in the Y income year.

There has been no return of capital.

You purchased a share (jointly with your spouse) in another Australian public company (company B) after 20 September 1985.

You applied for this share via a public prospectus.

An application for voluntary deregistration was made by the company to ASIC in the Y income year and strike-off action is in course.

There has been no return of capital.

You have not received any notification in writing from the liquidators or administrators of company B advising they have reasonable grounds to believe that there is no likelihood that you will receive any further distribution.

You purchased a share (jointly with your spouse) in another Australian public company (company C) after 20 September 1985.

You applied for this share via a public prospectus.

An application will be made to ASIC by the company for voluntary deregistration during the Y income year..

There has been no return of capital.

You have not received any notification in writing from the liquidators or administrators of company C advising they have reasonable grounds to believe that there is no likelihood that you will receive any further distribution.

You paid (jointly with your spouse) an amount for a share in another Australian public company (company D) after 20 September 1985.

You applied for this share via a prospectus.

An application for voluntary deregistration was made by the company in the Y income year and it was deregistered by ASIC in the same income year.

There has been a return of capital on this share.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 100-20

Income Tax Assessment Act 1997 Section 104-145

Income Tax Assessment Act 1997 Section 104-25

Reasons for decision

Please note all references are to the Income Tax Assessment Act 1997 unless otherwise advised.

Section 102-20 advises that you make a capital gain or capital loss as a result of a capital gains tax (CGT) event occurring. CGT events are the different types of transactions that may result in a capital gain or capital loss. You need to know which type of CGT event applies in your situation because it affects how you calculate those gains or losses. Similarly, the timing of a CGT event is also important because it determines in which income year you report your gains or losses.

Companies deregistered

CGT event C2 takes place when your ownership of a CGT asset ends by being redeemed, cancelled, surrendered or forfeited (section 104-25). Taxation Determination TD 2000/7 considers the circumstance when a company is deregistered.

Paragraph 1 of TD 2000/7 states:

In your case, you were a shareholder in an Australian public company (company A) which voluntarily applied to ASIC for deregistration. The company was subsequently deregistered in the Y income year.

You were also a shareholder in another Australian public company (company D) which voluntarily applied to ASIC for deregistration in the Y income year. The company was subsequently deregistered in the same income year.

CGT event C2 took place on two separation occasions on the dates these two companies were deregistered.

Companies not deregistered

As explained above, for a capital loss (or gain) to accrue, a CGT event must take place.

You are a shareholder in an Australian public company (company B) that has applied to ASIC for voluntary deregistration in the Y income year but which has not yet been deregistered.

Similarly, you are a shareholder in another Australian public company (company C) which intends to apply to ASIC for voluntary deregistration, but which has not yet done so.

CGT event G3 happens to shares when a company liquidator makes a declaration, in writing, that they have reasonable grounds to believe there is no likelihood that the shareholders will receive any further distributions from the company (section 104-145).

You have not received any such notification in writing from a liquidator or administrator. In addition, the companies are not yet deregistered.

Consequently, there has not yet been a CGT event that would trigger a capital gain or loss.

Conclusion

CGT event C2 occurred on the deregistration of company A and again when company D was deregistered. As these events occurred during the Y income year, you will need to include any capital gain or capital loss that resulted in your Y income tax return.

In the case of company B and company C, your capital gain or capital loss will need to be included in the income tax return that coincides with either:

Your capital loss in an income year may be offset against any assessable capital gains for the same income year. Any unapplied capital losses may be carried forward to offset the capital gains of future income years.

Joint ownership - apportionment

For CGT purposes, individuals who jointly own an asset to which a CGT event has occurred are to calculate their capital gain or loss in line with their interest in the asset. For example, a couple owning a rental property as joint tenants split the capital gain or loss equally between them

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