Private ruling: CGT - loss of a CGT asset
Date of advice: 4 March 2026
Published: 28 April 2026
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Did you make a capital loss under capital gains tax event C1 in subsection 104-20(1) of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to the investment scam? | A1: Yes.

Relevant facts and circumstances: You saw an advertisement on Social media for Company Z, an investment company. You contacted Company Z xx and requested details about the offer, seeking proof of registration, Australian Business Number, and Australian Securities and Investments Commission (ASIC) accreditation. You were provided with information via xxx and during xx conversations, later receiving an investment contract, which you signed. You communicated with a representative of Company Z via xx conversations, xx and/or xx messages in relation to their trading account offer, the transfer transactions, completing the processes to activate the account and how to set up the xx, where you could source information about xx on the xx and xx preparation. You transferred funds from your account held with an Australian financial institution (the Bank), with the transfers occurring on several dates with various amounts being transferred on each occasion. You were able to view your investments on Company Z's xx. Some months after you had invested with Company Z you received an amount of interest. You became aware that Company Z was a potential scam operation when a representative of the Bank contacted you. You visited your branch of the Bank on the same date to report the matter and requested the Bank investigate and recover your funds. You made a formal complaint to the police in relation to the investment scam. You contacted Company Z in relation to withdrawing your investment and they had sent you instructions about what you needed to do to withdraw your funds. You undertook the necessary actions to withdraw your funds in several withdrawal transactions. You contacted Company Z seeking them to acknowledge that they had received the documentation in relation to the withdrawal of your funds. However, you did not receive any response. You have not heard from Company Z, or any representative of Company Z, since they had sent the correspondence to you in relation to you withdrawing your invested funds. You lodged a complaint with an independent dispute resolution service organisation (Organisation A) as you believed the Bank failed in its duty of care to protect you given the nature of the scam and the size of the transactions. You were seeking full refund of the funds you had invested due to the Bank's failure to warn you, or block suspicious transactions, and failure to act upon their own fraud detection protocols. A representative of the Bank sent a letter to Organisation A which included the following information in relation to your unsuccessful dispute claim: • The Bank's security team had contacted you to discuss the transactions, and that the accredited firm may have been subject to a scam. You had visited the Bank on the same date and had spoken to the Bank's security team over the phone regarding the transactions and a dispute was lodged. • You were advised that the outcome of the dispute case was unsuccessful. • You remained dissatisfied with the outcome of your dispute and believe the Bank should have taken preventative measures to stop this event from happening, or recovery of the funds lost by you in relation to the issue being considered. • It had been concluded by the Bank that there had been no bank error in relation to this issue and that the Bank had not contributed to your financial loss. Additionally, the Bank was unable to recover any funds from the recipient; and • The Bank viewed that the disputed transactions were performed with your knowledge and consent, and that the Bank was not on notice, or had knowledge that the disputed transactions were part of a fraud event. Accordingly, the Bank was unable to provide any reimbursement or offers to you. You have not received any compensation amount and/or reimbursement for any part of the funds you had invested.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 subsection 104-20(1) | Income Tax Assessment Act 1997 subsection 104-20(2) | Income Tax Assessment Act 1997 subsection104-20(3)

Reasons for decision: Detailed Reasoning - Loss of a capital gains tax asset: Capital gains tax (CGT) event C1 happens if a CGT asset you own is lost or destroyed under subsection 104-20(1) of the ITAA 1997. The time of the CGT event when no compensation is received is when the loss is discovered under subsection 104-20(2) of the ITAA 1997. You make a capital loss as a result of the CGT event C1 happening if the capital proceeds are less than the CGT asset's reduced cost base under subsection 104-20(3) of the ITAA 1997. The first element of the reduced cost base is the money you paid or are required to pay in respect of acquiring the CGT asset under subsection 110-25(2) of the ITAA 1997. | Detailed Reasoning - Application to your situation: In your case, you transferred funds to Company Z for the purpose of acquiring xx. For CGT purposes, you acquired a CGT asset under section 108-5 of the Income Tax Assessment Act 1997 when you transferred the funds, such as a contractual right at the time you entered the arrangement. You were not able to withdraw your invested funds and have not heard from Company Z and/or any representative of theirs. For CGT purposes it is viewed that your CGT asset was lost and CGT event C1 occurred during the 20xx-xx income year, with a capital loss arising as a result of the CGT event C1. Therefore, you can use the capital loss arising as a result of the CGT event C1 occurring to offset any capital gain made in the income year the CGT event occurred, or carry the capital loss forward to future income years if you do not have any capital gain/s in the income year in which the capital loss was made.