Private ruling: Capital loss
Date of advice: 14 April 2022
Published: July 2022
Ruling period: Year ended 30 June 20xx
Date scheme commenced: 1 July 20xx

Ruling: Q1: Have you made a capital loss in relation to your $X payment? | A1: Yes. Your rights under your employment agreement constitute an intangible CGT asset. CGT event C2 happened when you surrendered those rights by choosing to terminate your employment. Under subsection 110-35(11) of the Income Tax Assessment Act 1997 , incidental costs in relation to a CGT event that form part of the cost base of a CGT asset include termination or other similar fees incurred as a direct result of your ownership of a CGT asset ending. Your $X payment was incurred as a direct result of your rights under your employment agreement ending. Therefore, you can include this payment in your cost base. As there were no capital proceeds from the ending of your ownership of the intangible CGT asset, you have made a capital loss.

Relevant facts and circumstances: You were a party to an agreement with Z which included the terms that you would be employed by Z and if you ceased working for Z within X years you would be liable to make a payment to Z. You ceased working for Z within X years and consequently made a payment of $X to Z. You did not receive, and were not entitled to, any capital proceeds from the ending of your rights under your employment agreement.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 118-195(1)