Edited version of private advice

Authorisation Number: 1051765173590

Date of advice: 9 October 2020

Ruling

Subject: Capital gains tax - capital losses

Question

Did the capital loss arising in relation to the capital gains tax event C2 occur during the 20XX-XX income year?

Answer

Yes. As you have abandoned your efforts to obtain any amount/s in relation to the investment during the 20XX-XX income year, this is the income year in which you have made the capital loss in relation to the investment.

Further information about capital losses and how to apply them can be viewed on our web site by searching for QC 22161.

This ruling applies for the following period:

Income year ending 30 June 20XX

The scheme commences on

1 July 20XX

Relevant facts and circumstances

You were contacted by a person presenting themselves as a representative of Company X in relation to an investment opportunity they were offering where they invested money on a specified stock exchange in Company A. You were advised that they had received your phone number through an investors list to which they subscribed.

You expressed your interest in the investment being offered and were sent an email containing further details about the investment in Company A.

You asked for proof of the legitimacy of Company X and were provided with several links to several organisations which you checked. You also contacted a foreign government department (Foreign Department) to confirm Company X was legitimate, who confirmed that it was legitimate and was operating in an overseas country with their primary operations being wealth and asset management.

You asked to speak to an existing Australian customer of Company X. You signed a non-disclosure agreement and were provided with an Australian phone number which you called and discussed the person's experiences with Company X (this phone number is no longer connected).

An account was set up so that you could log in via Company X's web portal.

You commenced paying money in relation to the investment and received a share certificate, with the balance of your account being shown on their online portal.

You used one of your bank accounts in relation to the investment and an amount of $X,XXX was transferred into your bank account from Company X in relation to the investment.

Company X sent you confirmation of your trade transfers, outlining the quantity of Company A shares, the trade value of the shares and the date the transferred funds had been received.

You decided to take the profits from your shares in Company A as it had been performing well and transfer the money to Australia. You had numerous interactions with persons presenting themselves as representatives of Company X in relation to this matter without success.

You became increasingly nervous and suspicious about the investment activities and requested to be given contact numbers for other persons in Company X to speak to in relation to this matter, but were provided with email addresses to send your complaint/s with your emails not being delivered due to the email addresses not existing. When questioned about this issue you were advised that there was a 'firewall' issue and to resend your emails.

You decided not to transfer any further funds in relation to the investment.

You became concerned about your investment and contacted the Foreign Department who confirmed that Company X was a legitimate company, but that it did not have a registered website and that you should not deal with anybody operating through a website for Company X.

You suspected that the investment operation was a fraud and contacted enforcement agencies and various parties such as the state police in Australia, banks involved with the operation, the Australian Cyber Security Centre (ACSC) and Equifax.

The Australian detective investigating your case confirmed that the money you had transferred in relation to the investment operation was moved offshore and was not traceable.

You received correspondence from the Foreign Department confirming that Company X had been identified as a suspicious entity and that it had been added to their watch list, advising that while they may take disciplinary action against the licensee or prosecute a wrongdoer, they do not have the legal power to make an order for compensation, nor could they arbitrate a dispute between an investor and a third party.

Representatives from Company X had continued to contact you during the period of your investigations, encouraging you to transfer funds to cover tax and company setup, which you did not do. These efforts to contact you have ceased.

Company X's previous website has disappeared and the phone numbers for Company X that had been used in relation to the website are no longer connected. As a result, you have not been able to contact Company X due to your emails not being delivered and the phone numbers have been disconnected.

You have made considerable efforts to communicate with Company X to resolve this issue and now consider that the funds you transferred in relation to the investment operations are lost.

You invested a total of $XXX,XXX in relation to the investment.

You have abandoned the thought that any money will be received in relation to the investment and have ceased pursuing Company X in the income year ended 30 June 20XX.

You were not carrying on a business in relation to the investment considered in this ruling.

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

Income Tax Assessment Act 1997 Division 110

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