Private ruling: Investment
Published: February 2012
Ruling period: Year ending 30 June 2012
Date scheme commenced: 1 July 2009

Ruling: Q1: Can a capital gains tax (CGT) loss occur in relation share proceeds owed to you, which you have not been able to obtain, in respect to a company takeover? | A1: No.

Relevant facts and circumstances: You held shares in an ASX (Australian Stock Exchange) listed company, which merged with a company listed overseas and then ceased trading on the ASX. At a later time, another company took over this company. Since the takeover, you have tried to recover your funds, but without success, due to identification issues with the relevant overseas companies. You wish to write off your investment so you can windup your fund.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 100-20 | Income Tax Assessment Act 1997 Section 104-1 | Income Tax Assessment Act 1997 Section 104-5

Reasons for decision: Summary: Section 100-20 of the Income Tax Assessment Act 1997 (ITAA 1997) states: 'You can make a capital gain or loss only if a CGT event happens.' Section 104-1 of the ITAA 1997 states (about Division 104 of the ITAA 1997): 'This Division sets out all the CGT events for which you can make a capital gain or loss.' Section 104-5 of the ITAA 1997 provides a summary of the CGT events, from CGT event A1 to CGT event L8. CGT events that are commonly related to shares include: § CGT event A1: Disposal of a CGT asset. § CGT event E2: Transferring a CGT asset to a trust. § CGT event G1: Capital payment for shares. § CGT event G3: Liquidator or administrator declares shares or financial instruments worthless. In your case, there is no CGT event applicable to your circumstances. Therefore, you cannot realise a CGT loss in relation to your entitlement from the takeover of your shares.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.