Edited version of private advice

Authorisation Number: 1052173637459

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 [description of the fraudulent arrangement]?

Answer

Yes. You acquired contractual rights from the outset of the arrangement.

Question 2

Did a CGT event subsequently happen to those contractual rights such that a capital gain or capital loss may be made?

Answer

Yes. CGT event C1 happened in respect of the contractual right when you discovered your loss and repudiated the contract.

This ruling applies for the followingperiods:

1 July 20XX to 30 June 20XX

The scheme commenced on:

1 July 202X

Relevant facts and circumstances

In 20xx you were investigating investment opportunities online as you were about to sell an investment property, of which you held a 50% share. You received a call from Person A from an institution you believed to be a well-known investment bank ("the Investment Bank"). You advised them that you expected funds in about three months and they emailed prospectus documents which you believed to be genuine.

Later in 20xx, you sold the investment property, with settlement 3 months later. A month before settlement you received a call from Person B who claimed to be Person A's manager. Person B claimed that they were the head of the Fixed Income area at the Investment Bank and your account had been allocated to them. This person contacted you on 'WhatsApp' and also left voice messages. When you decided which investment you required and the funds had been received, you were sent a WhatsApp message including a letter headed confirmation of investments.

You were emailed a Contract note advising the clearing house to which to send the funds. You have stated in your application that you sent $xxxx of your funds. Half of this amount was yours. You have provided a dated copy of the Domestic Telegraphic Transfer Receipt.

You believed you had invested in bank bonds through the Investment Bank with a fixed rate of return paid quarterly. You were advised that you would receive a registered letter providing written confirmation of your investment, including the start date and maturity date. The money was sent as instructed and Person B advised the transaction had gone through.

You did not receive any documentation. You contacted the Investment Bank and the institution providing the bonds and they had no record of any account or investment. You found out the investment was not genuine and neither Person A nor Person B were representatives of the investment bank.

Relevant legislative provisions

Section 102-5 Income Tax Assessment Act 1997

Section 104-20 Income Tax Assessment Act 1997

Section 108-5 Income Tax Assessment Act 1997