Edited version of private advice

Authorisation Number: 1052123710712

Date of advice: 1 June 2023

Ruling

Subject: Investment loss - scam

Question 1

Are you entitled to claim a capital loss a result from an investment scam?

Answer

Yes. You are entitled to a capital loss under section 104-20 of the Income Tax Assessment Act 1997 (ITAA 1997). From the information provided, the most relevant CGT event is considered to be CGT event C1. CGT event C2 is not considered appropriate as the debt was not redeemed, cancelled, released, discharged, satisfied, expiring, abandoned, surrendered or forfeited.

Question 2

Are you entitled to claim the capital loss against future capital gain?

Answer

Yes. If your allowable capital losses are greater than your capital gains, you have a net capital loss. You cannot deduct a net capital loss from your income but you can carry it forward and deduct it from capital gains in later years. There is no time limit on how long you can carry forward a net capital loss.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

On the specified date that you provided, you were contacted in by an individual who claimed to work for an overseas trading company (Company A).

After multiple communications between you and Company A, on the specified date, you completed an application form permitting you to conduct trades with Company A. You returned this to the required email address.

On the specified date, you made your first payment to a financial institution bank account in Country A as directed by Company A.

During a nine-month period, you made eight deposits to the financial institution located in Country A.

During this nine-month period, you communicated with several people within Company A, including the Personal Assistant to the Director.

On the specified date, you requested your portfolio to be liquidated and funds returned to your Australian Financial Institution from Company A.

You were informed that the funds would be available three weeks later.

On the date you were expecting your funds to be available, you were blocked from your online holding portfolio account.

During a specified month, you contacted State A Police and your financial institution. After you spoke with your financial institution, you felt the investment may be a scam.

You subsequently contacted the Australian Embassy in Country B (the country where Company A is located) via email listing your concerns about Company A and sought clarification as to whether they were reputable.

A week later, you received a response from the Australian Embassy in Country B via email advising that the Australian Securities and Investment Commission (ASIC) lists Company A as a company which may be involved in scam activity and that ASIC provided advice about dealing with the Company A.

On a specified date, you received an email from Company A with further requests to invest money.

You did not engage with Company A after this communication.

Relevant legislative provisions

Income Tax Assessment Act 1997 Division 104

Income Tax Assessment Act 1997 subsection 104-20(1)

Income Tax Assessment Act 1997 paragraph 104-20(2)(b)

Income Tax Assessment Act 1997 subsection 104-20(3)

Income Tax Assessment Act 1997 section 108-5

Income Tax Assessment Act 1997 subsection 116-20(1)