Edited version of private advice

Authorisation Number: 1052397092785

Date of advice: 19 May 2025

Ruling

Subject: Capital gains tax

Question 1

Did you acquire a capital gains tax (CGT) asset under section 108-5 of the Income Tax Assessment Act 1997 (ITAA 1997)) as a result of entering into an investment scheme?

Answer 1

Yes. You acquired contractual rights from the date of the first payment you made.

Question 2

Did a CGT event C2 subsequently happen to those contractual rights such that a capital gain or capital loss may be made?

Answer 2

Yes. CGT event C2 occurs when your ownership of an intangible asset ends through cancellation, surrender or similar endings. Your ownership of the asset ended when you realised you would not be re-paid.

Question 3

Will the Commissioner allow a capital loss to be reported on your income tax return for the year ended XX XXX 20XX?

Answer 3

Yes. Any capital gain made in the same income year that the CGT event C2 occurred can be reduced by the capital loss and, to the extent there is an excess, either include the net capital gain in your assessable income or carry any net capital loss forward to offset against future capital gains.

This ruling applies for the following periods:

Year ended XX XXX 20XX.

Year ended XX XXX 20XX.

Year ended XX XXX 20XX.

Year ended XX XXX 20XX.

The scheme commenced on:

XX XXX 20XX.

Relevant facts and circumstances

In 20XX a new employee started working at your place of employment. Introduced to you as Person A, they worked in the same area as you and held the same position.

In XXX 20XX Person A had begun talking to you about a potential investment opportunity. They advised that they had a friend who owned a hotel and was going to be undertaking some renovations and needed funds to do this. The investment opportunity Person A outlined was to lend their friend some funds for a period of 3 months with 10% interest.

To reassure you of the sincerity of the offer Person A provided you with their driver's licence, allowing you to take a copy.

Over a period of 3 months, you transferred a total of $X to Person A's bank account with Bank A.

You had no written agreement or contract, just a verbal agreement with Person A that this loan would be repaid together with the interest of 10%.

You were aware that two other colleagues in your office invested with Person A in this manner as well.

In XXX 20XX Person A paid you $X cash, advising you this was from the hotel renovations loan investment.

Person A also offered you an international share trading option for two months. They offered you the opportunity to use their account until such time as you had your own international share trading account.

Person A advised that if you invested $X they would pay you a return of between $X to $X. If you invested $X then they would pay you a return of between $X and $X.

Person A did not show you any evidence of their share trading.

You decided to invest $X with Person A and in XXX 20XX made three transactions to Person A's Bank B account from your child's Bank C account.

On XX XXX 20XX Person A transferred an amount of $X to your personal Bank C account. They advised you this was return from the international share trading.

Around the end of XXX 20XX, you had begun to be suspicious over the veracity of the hotel renovations investment and you asked Person A for your money back. You advised you weren't concerned about the interest, you just wanted your principal amount returned. You were willing to remain in the international share trading investment.

On XX XXX 20XX Person A advised you that they would pay you back in XXX when they sold their home.

Your work team was a small group where everyone knew everyone and as such you felt obligated to give Person A the benefit of the doubt.

In XXX 20XX Person A stopped coming into the office for work which made you feel concerned.

In XXX 20XX you went to your lawyer with your concerns. Your lawyer conducted a property search under Person A's name and found that they had no property in Australia listed under their name.

In XXX and XXX 20XX, you also approached your bank about getting the money recovered but they were unable to assist.

Person A resigned from your employer. They stopped responding to your phone calls or emails.

On XX XXX 20XX you reported the matter to the police and made a statement on the matter.

On XX XXX 20XX you had a further interview with the police.

The police and a forensic accountant investigated the matter through to XXX20XX when the matter went to court.

On XX XXX 20XX the first court hearing was held on the matter.

On XX XXX 20XX the second court hearing was held on the matter.

On XX XXX 20XX the third court hearing was held on the matter.

Person A pleaded guilty to the charges brought against them of Obtaining Financial Advantage by Deception.

On XX XXX 20XX Person A was ordered by the court to perform community service hours and to pay compensation to you of $X. This was to be paid in monthly instalments of $X, starting on XX XXX 20XX and due thereafter on the first of each month.

On XX XXX 20XX a payment of $X was made and as at that date the balance still owing to you was $X. You advise you have not received any further payments.

In total you transferred $X to Person A and have received only $X of that money.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-25

Income Tax Assessment Act 1997 section 108-5

Income Tax Assessment Act 1997 section 110-55

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