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Edited version of your private ruling
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Ruling
Subject: Capital gains tax
Questions and answers
1. Did CGT event G3 happen when the liquidator of Company X informed you that you would not receive any return on your investment or any repayment of capital?
Yes.
2. Can you declare your capital loss in the income year ended 30 June 2011?
No.
This ruling applies for the following period
Year ended 30 June 2011
Year ending 30 June 2012
The scheme commenced on
1 July 2010
Relevant facts
You invested a sum of money by way of a loan in Company X several years ago.
In the income year ending 30 June 2012, the liquidator of Company X informed you that you would not receive any return on your investment or any repayment of capital.
You believe that the capital loss should be included in the year ended 30 June 2011, as you realised in that income year that you would not be getting any money back from your investment.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-145.
Reasons for decision
Section 104-145 of the Income Tax Assessment Act 1997 (ITAA 1997) states that CGT event G3 happens to the owner of a financial instrument in a company when a liquidator declares in writing that they have reasonable grounds to believe that financial instruments have no value. Financial instruments include loans to a company. The time of the event is when the declaration is made.
In your case, CGT event C3 happened when the liquidator for Company X informed you in writing that you would not receive any interest or return of capital on your investment with Company X.
This happened during the income year ending 30 June 2012. Therefore, this is the income year that a capital loss may be claimed. It cannot be claimed in an income year prior to the year the event occurred in.
Although we acknowledge that you may have been aware that liquidation was likely prior to official notification by the liquidator, the ITAA 1997 does not give the Commissioner any discretion to allow a taxpayer to include a capital loss in an income year prior to CGT event G3 occurring.