Edited version of private advice

Authorisation Number: 1052123066355

Date of advice: 15 January 2024

Ruling

Subject: High yield investment scheme - capital loss

Question 1

Did you acquire a CGT asset (as defined in section 108-5 of the Income Tax Assessment Act 1997 (ITAA 1997)) as a result of entering into a high yield investment scheme?

Answer

Yes. You acquired a CGT asset being a contractual right at the time of entering the arrangement.

Question 2

Did a CGT event subsequently happen to that contractual right?

Answer

Yes. CGT event C1 happened in respect of the contractual right when the contractual right came to an end. Section 104-20 of the ITAA 1997 outlines the rules for CGT event C1.

This ruling applies for the following periods:

1 July 20YY to 30 June 20YY

1 July 20YY to 30 June 20YY

The scheme commenced on:

1 July 2022

Relevant facts and circumstances

You are an Australian resident and work as a consultant.

You invested in shares in Australia and the USA. Capital gains made from the sale shares are included in your tax returns for the income tax years 20XX, 20XX, 20XX and 20XX.

You approached a security investment broker on-line. You conducted some research on the legitimacy of the firm. They were located in the USA and had a professional website. They advertised themselves as experts under a registered trading number.

You also had a self-managed superfund. There is a corporate trustee of the superfund. Both you and the superfund acquired investments from the investment firm. You and the superfund provided funds through to the nominated account of the investment firm for the purchase of a securities portfolio.

You could access your portfolio through the firm's online platform. Documentation was provided supporting the investment portfolio.

You attempted to access the funds in 20XX which the investment firm denied and no longer responded to your requests. The online portal was non-responsive and no funds could be withdrawn. In 20XX, you were notified that the account manager did not work for the investment firm. This person had stolen and embezzled the funds posing as an equity trader on behalf of a legitimate investment firm. You were notified by a funds recovery firm that this firm was a fraudulent company and not the licensed legitimate securities company. As at 20XX, the amounts invested were no longer available to be accessed. A police report was filed 20XX.

The principal of the firm was arrested in 20XX and was subject to criminal charges in the USA. The outcome of the case was that the person was found guilty and sentenced to prison.

No funds in relation to these investments have been recovered. In 20XX you and the superfund abandoned efforts to recover these investments.

You and the superfund are not carrying on a business of share trading. You are both investors.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 102-5

Income Tax Assessment Act 1997 section 104-20

Income Tax Assessment Act 1997 section 108-5