Edited version of private advice

Authorisation Number: 1052196555816

Date of advice: 18 December 2023

Ruling

Subject: Deductions - scam

Question

Are you entitled to claim capital loss in relation to the money transferred for share investment?

Answer

Yes

Based on the information provided, it is accepted that your investment was a scam as your bank stopped your transactions along with advising that it was a scam.

It is appropriate to consider that Company A to be your agent in facilitating the transactions in managing your investment.

The debt or obligation owed to you by <Company> is a CGT asset. As you did not receive any compensation for the loss the CGT event C1 happened when you discovered the loss on a specified date.

As you did not receive any proceeds from the CGT asset your capital proceeds are nil and the reduced cost base is the amount that you paid to Company A to invest on your behalf.

Therefore, the capital loss you made from CGT event C1 happening is the amount that you transferred to Company A to invest on your behalf.

The capital loss cannot be offset against income from other sources but must be offset against capital gains and may be carried forward to offset against future capital gains.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

On a specified date, you received a call from Person B of Company A who offered you a XXX XXX XXX software. The program was designed to purchase and sell shares without your involvement and generate lot of profit.

You were advised by Person B that a XXX adviser would contact you to set up the program.

You provided us with details on how much the software cost to purchase and the date that you transferred the money to purchase the software.

On a specified date, you were contacted by Person C, a XXX adviser from Country A. They called you to set up the account. Person C advised you that a person named Person D would install the program for you. You gave them access to your computer to install the program and you were told that they would operate it for you.

On a specified date, Person C advised you that there was a deal where you could make a profit several times your investment.

You agreed to transfer the amount in multiple payments due to your daily transfer limit with your bank.

When you were making the transfers, Person C was on the phone with you and gave you details of the account to which you should transfer the funds to.

All funds were transferred to Australian bank accounts, and you were advised that the account holders were Person C's agents.

You had many phone calls with Person C and a few calls from Person D, along with XXX messages.

On a specified date, Person C called you and offered an investment deal that would make you a lot of profit and they requested a specified amount. You didn't have the funds available in your business account, so you agreed to transfer the funds from your personal account. That night you transferred the funds from your bank account with Bank A.

On a specified date, you received a call from Bank A's fraud section and asked you the reason for the transfer, and you told them that you were offered a good investment. The caller felt that it was a scam, and the caller was going to stop the transfer. Fortunately, the caller managed to stop the transfers and advised you not to contact either Person B, Person C or Person D.

You told the caller that you had already transferred a specified amount from your other bank with Bank B and the caller advised you to contact Bank B.

You rang Bank B on a specified date and spoke to their financial team to recover the amount paid from your business account, however you were informed that it was too late. Bank B froze your business account.

Bank B instructed you to get your computer technician to check your computer for viruses and delete the XXX program that was installed on your computer. Bank B asked you to confirm in writing that the actions had been completed before they would activate your business account.

You engaged Company B to do a complete scan and checking of all the files. You then provided Bank B with a copy of the invoice.

Bank B investigated your scam report, and they were unable to retrieve any of the amount nor were able to reimburse you.

You filed a police report with all the details and submitted relevant correspondences.

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)