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Edited version of private advice
Authorisation Number: 1051972228551
Date of advice: 14 April 2022
Ruling
Subject: Capital loss
Question
Have you made a capital loss in relation to your $X payment?
Answer
Yes.
Your rights under your employment agreement constitute an intangible CGT asset. CGT event C2 happened when you surrendered those rights by choosing to terminate your employment. Under subsection 110-35(11) of the Income Tax Assessment Act 1997, incidental costs in relation to a CGT event that form part of the cost base of a CGT asset include termination or other similar fees incurred as a direct result of your ownership of a CGT asset ending. Your $X payment was incurred as a direct result of your rights under your employment agreement ending. Therefore, you can include this payment in your cost base. As there were no capital proceeds from the ending of your ownership of the intangible CGT asset, you have made a capital loss.
This ruling applies for the following period:
Year ended 30 June 20xx
The scheme commences on:
1 July 20xx
Relevant facts and circumstances
You were a party to an agreement with Z which included the terms that you would be employed by Z and if you ceased working for Z within X years you would be liable to make a payment to Z.
You ceased working for Z within X years and consequently made a payment of $X to Z.
You did not receive, and were not entitled to, any capital proceeds from the ending of your rights under your employment agreement.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 118-195(1)