Private ruling: Capital gains tax - investment scam
Date of advice: 19 December 2025
Published: 9 February 2026
Ruling period: Year ended 20XX.
Date scheme commenced: X/XX/20XX

Ruling: Q1: Are you entitled to claim a capital loss under CGT event C1 in subsection 104-20(1) of the Income Tax Assessment Act 1997 in the 20XX income year as a result of entering into an investment scam? | A1: Yes.

Relevant facts and circumstances: You were seeking to invest funds to provide for your retirement. In your search for an appropriate investment firm, you discovered Company A. You conducted due diligence of Company A and its operations. After completing your due diligence, you decided to use Company A to acquire corporate bonds to help provide for your and your spouse's retirement. You transferred funds totalling $XX,XXX into Company's bank account in a number of instalments due to the daily financial transaction limit of your bank. Company A issued statements that showed the transfer of funds into your account and those funds then being used to acquire corporate bonds issued by global financial institutions. You became aware that Company A was a potential scam operation when your Bank made the financial transfer to Company A's bank account. You immediately called representatives of Company A seeking to get your money back and were advised that your funds will be returned after this call. Company A never returned the funds as promised and since that time you have been unable to contact them. Your Bank was able to recover the last transfer it made to Company A's bank account that totalled $XX,XXX. You made formal complaints to police and the corporate regulator given your losses from the alleged investment scam.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 104-20(1) | Income Tax Assessment Act 1997 subsection 104-20(2) | Income Tax Assessment Act 1997 subsection 104-20(3) | Income Tax Assessment Act 1997 subsection 110-25(2) | Income Tax Assessment Act 1997 subsection 110-25(3)

Reasons for decision: Summary: CGT event C1 happens if a CGT asset you own is lost or destroyed. The time of the CGT event C1 is when compensation is first received for the loss. If no compensation is received, the time of the event is when the loss is discovered, or the destruction occurred (section 104-20). A capital gain or loss from CGT event C1 happening is determined by calculating the difference between the capital proceeds received on the happening of the event and the cost base or reduced cost base of the CGT asset that is lost or destroyed. The words 'lost' and 'destroyed' are not defined in the Income Tax Assessment Acts and they take their ordinary meaning. Paragraph 2 of Taxation Determination TD 1999/79: Income Tax: capital gains: does the expression 'lost' or 'destroyed' for the purposes of CGT event C1 in subsection 104-20(1) of the Income Tax Assessment Act 1997 apply to: (a) a voluntary 'loss' or 'destruction'? (b) intangible assets? states: The word 'lost' in its context in subsection 104-20(1) does not contemplate voluntary actions. The Macquarie Dictionary, 3rd ed , defines 'lost' as '1. To come to be without, by some chance, and not know the whereabouts of: to lose a ring'. The word in its context in the CGT event C1 suggests an involuntary rather than a voluntary act. Paragraph 7 of TD 1999/79 confirms that CGT event C1 does not distinguish between tangible and intangible CGT assets. You engaged with Company A with the intention of acquiring X corporate bonds. You transferred funds to Company A's bank account in instalments due to the financial daily transaction limit imposed by your Bank. Company A provided you with statements indicating that the funds you transferred to Company A were used to acquire the corporate bonds. At about the time your Bank made the last transfer to Company A's bank account, your Bank had been advised that Company A's bank account was being frozen because Company A was potential operating a potential scam. After being advised that you were potentially being scammed you immediately contacted Company A by telephone to attempt to have the funds you transferred returned to you. When you called Company A you were assured that your money would be returned. However, you have not been able make any further contact with Company A and your funds have never been returned. You subsequently reported the scam to the corporate regulator and the police. The arrangement you entered is considered a scam, as you provided evidence by way of statements issued by Company A that you had established an account and the corporate bonds you selected were allocated to your account. Your Bank was able to recover the amount of the final payment that you made to Company A's bank account which totalled $XX,XXX. Accordingly, CGT event C1 happened on the day you received the funds your Bank was able to recover from the last transfer to Company A's bank account. You make a capital loss as a result of the CGT event C1 happening if the capital proceeds from the loss of the corporate bonds is less than the CGT asset's reduced cost base. [1] | Detailed Reasoning - Cost base of the investment bonds: Subsection 110-55(1) provides that the reduced cost base of a CGT asset consists of 5 elements. All of the elements of the (except the third one) of the reduced cost base ire same as those for the cost base of a CGT asset. Subsection 110-25(2) provides that the first element of the cost base is the total of: (a) the money you paid or required to pay in respect of acquiring the CGT asset, and (b) the market value of any other property you gave or are required to give in respect of acquiring it (worked out as at the time of the acquisition). The second element of the cost base of a CGT asset is the incidental costs incurred in relation to its acquisition, including the remuneration of a broker. [2] None of the other elements of the reduced cost base contribute an amount to the reduced cost base of the corporate bonds acquired. Consequently, the reduced cost base of each corporate bond acquired is $XX,XXX and $XX,XXX respectively. Accordingly, you have made a capital loss equivalent to the amount transferred to Company A's bank account to acquire X corporate bonds less the funds your Bank was able to recover from the last transfer you made to Company A's bank account of $XX,XXX. [1] Subsection 110-20(3) [2] Subsections 110-25(3) and 110-35(2)