Private ruling: Capital gains tax
Date of advice: 12 November 2024
Published: 13 January 2025
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is a discretion available to disregard the capital gains tax (CGT) event that occurred when the units in your investment option were sold in error? | A1: No.

Relevant facts and circumstances: You have an investment option that is managed by a financial advisor. On XX/XX/20XX, you met with your financial advisor who recommended that you contribute $XXXX to your superannuation fund as a concessional contribution. This amount was to be funded by your bank account with a reimbursement to be made from your investment option after XX/20XX. On XX/XX/20XX, you instructed your financial advisor to redeem $XXXX from your investment option and have it paid to your nominated bank account. On the same day, all units in the investment option were sold for $XXXX. On XX/XX/20XX, you contacted your financial advisor to inform them that all the units in your investment option had been sold. Your financial advisor repurchased the remaining units back on the same day for $XXXX. A capital gain occurred upon the initial sale of the units in your investment option. Your financial advisor has admitted that the sale of the units was due to their error.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 120-20

Reasons for decision: Summary: Section 120-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that an entity will make a capital gain or a capital loss if a capital gains tax (CGT) event happens to a CGT asset. CGT event A1 occurs when you dispose of a CGT asset. You are considered to have disposed of a CGT asset if a change of ownership occurs from you to another entity because of some act or event or by operation of law. The capital gain or capital loss is made at the time of the event (section 104-10 of the ITAA 1997). In your case, the units you own in your investment option are CGT assets. CGT event A1 occurred when the units were sold in error. Although your financial advisor purchased the same number of units to replace the ones that were sold in error, the acquisition of the new units was a separate transaction and does not negate the disposal. There are several provisions within the ITAA 1997 that may exempt, exclude of defer a liability for CGT in certain circumstances, however there are no provisions in the legislation to disregard the CGT event that occurred. Therefore, any capital gain that occurred on disposal of the units in your investment option cannot be disregarded.