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Edited version of private ruling
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Ruling
Subject: Capital loss - shares
Question
Can you amend your 2008-09 income tax return to include a capital loss as a result of the shares being declared worthless?
Answers
No.
This ruling applies for the following period
Year ended 30 June 2009.
Year ended 30 June 2011.
The scheme commenced on
1 July 1999.
Relevant facts
You purchased shares.
You were allotted additional shares.
In 2011, the liquidators made a written declaration stating that no further distributions will be made to shareholders.
Relevant legislative provisions
Income Tax Assessment Act Section 104-145
Reasons for decision
Capital gains tax event G3
Capital gains tax (CGT) event G3 happens when the liquidator makes a written declaration that he or she has reasonable grounds to believe that there is no likelihood that shareholders will receive any further distribution from the company. If this declaration is made, shareholders can choose to make a capital loss on their shares at the time the declaration is made. The capital loss arises in the income year in which the liquidator makes the declaration.
A capital loss can only be offset against a capital gain. Where a capital loss cannot be offset against a capital gain in that income year, the capital loss is carried forward until such time that a capital gain is made and the capital loss can be used to offset that capital gain.
In this case, the liquidators made a written declaration stating that no further distributions will be made to shareholders in 2011. The capital loss on the shares therefore arises in the 2010-11 income tax year. The Commissioner will not amend your 2008-09 income tax return as the capital loss on the shares arises in the 2010-11 income tax year when the written declaration by the liquidators was made.
Please note: You will be entitled to include a capital loss on the shares in your 2010-11 income tax return.