Private ruling: Disposal of traditional securities
Date of advice: 12 May 2021
Published: July 2021
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to a deduction for the loss made on the disposal of fixed interest securities under section 70B of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: Yes. Your securities meet the definition of traditional securities. They were not segregated assets of an insurance company or a complying superfund and were not converted into ordinary shares in a company. The transactions were conducted at arm's length. The securities were marketable securities and were acquired and disposed of in the ordinary course of trading on the securities market. Therefore, none of the exclusions apply to your circumstances. Consequently, you are entitled to a deduction for the losses incurred on the disposal of your securities under section 70B of the ITAA 1936.

Relevant facts and circumstances: You invested in various fixed coupon bonds through a financial institution. The bonds were acquired and disposed of at various times during the income year. Some bonds realised a gain on disposal and others a loss on disposal. You paid a premium which included an amount of accrued interest to purchase the bonds from the former owner. A coupon interest rate is paid over the term of the bonds. These coupon payments are paid semi-annually over the term of the bonds. The bonds were not issued at a discount rate exceeding 1.5% per annum. The bonds do not pay any deferred interest. The bonds' capital is not indexed. The redemption dates of the bonds are in a few years' time ranging between four years to eight years. There is no entitlement to any other payments when the bonds are redeemed. At maturity the holder will receive the face value of the bonds. You are not in the business of trading in bonds and securities. There were no specific concerns at the time of the disposals in relation to the issuer's ability to meet its liabilities. The acquisition and disposal of the bonds was done at arm's length. The bonds were not converted or exchanged for ordinary shares on their disposal. There was no waiver or release of a debt under the bonds by you.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 26BB | Income Tax Assessment Act 1936 section 70B