Private ruling: Commissioner's discretion
Date of advice: 4 May 2026
Published: 20 July 2026
Ruling period: 1 July 20XXto 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: In respect of Company A's shareholding in Company B, did CGT event G3 happen on XX pursuant to subsection 104-145(1) of the ITAA 1997? | A1: Yes. | Q2: Will the Commissioner exercise the discretion under paragraph 103-25(1)(b) of the ITAA 1997 to allow an extension of time to choose to make a capital loss in the 20XX-XX income year | A2: Yes.

Relevant facts and circumstances: Company A Ltd and Company B, Inc 1. Company A is an Australian company, the head company of a tax consolidated group with its wholly owned Australian resident subsidiaries. 2. In 20XX, Company A acquired a XX% interest in Company B, a corporation registered under the laws of a foreign country. 3. Company A paid consideration for its interest in Company B as part of a capital raising, and the interest was held by its subsidiary. 4. The following year, Company A fully impaired its investment in Company B for accounting purposes. 5. There were at least two capital raisings undertaken by Company B in which Company A did not participate, resulting in its interest being diluted to under X%. Liquidation of Company B 6. Company B approached Company C, a corporate insolvency and wind down consulting service, to facilitate the liquidation of Company B. 7. Company C caused a special purpose vehicle (Assignee) to be formed to function as the assignee under a legal process known as a 'general assignment for the benefit of creditors' (ABC). 8. Pursuant to the state laws governing the ABC, the Assignee was assigned Company B's assets and operates in a fiduciary capacity on behalf of Company B's creditors, while Company B is being liquidated. 9. At a later date, the Manager of the Assignee, declared in writing that, inter alia: declaration supplied 10. The Manager did not share the Declaration with Company A when it was made, or otherwise notify Company A of the making of the Declaration. 11. Company B is in the process of being liquidated. The ABC process 12. The ABC process in the foreign country allows a financially distressed business to wind down without filing for bankruptcy, by formally assigning all its assets to a chosen, independent third party. The agreement transfers 'ownership, custody and control of all the assignor's property to the assignee, who acts as a fiduciary for the creditors' benefit.' 13. The ABC process is governed by state law and is handled privately between the assignor, assignee and creditors, as opposed to bankruptcy which is a federal court proceeding supervised by a judge. The Manager 14. Company C is a limited liability company providing corporate insolvency and wind down consulting services. 15. Person X is listed as a Partner at Company C. Their credentials state that they are an insolvency professional, who previously practiced as a bankruptcy attorney, and have worked as an out-of-court insolvency service provider and liquidation agent. 16. Company C was appointed manager of the Assignee through Person X. Company A's inquiries about its interest in Company B 17. Company A has recently been reviewing its group structure and became aware that it retained a shareholding in Company B. In an effort to obtain information about its impaired interest, Company A unsuccessfully attempted to contact them, eventually learning of Person X as Manager of the Assignee. Upon contact they were advised by email that: • Company B had entered an insolvency process, of which the Manager was the 'trustee; • the Assignee was still collecting money on the sale of Company B's assets; • the Manager did not expect any funds to be remaining for shareholders at the end of that collections process, as it was believed the purchase price would not cover Company B's debt. 18. The Manager also provided a copy of the declaration referred to above, addressed to 'Whom it May Concern', dated, and titled 'Re: Assignment for the Benefit of Creditors of Company B'. The letter is signed by Person X, Manager, Company Liquidation LLC, Assignee.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 6 | Income Tax Assessment Act 1936 section 170 | Income Tax Assessment Act 1997 section 103-25 | Income Tax Assessment Act 1997 section 104-145 | Income Tax Assessment Act 1997 section 995-1

Reasons for decision: Summary: Question 1 Legislative references in this document refer to the Income Tax Assessment Act 1997 unless stated otherwise. Section 104-5 contains a table listing CGT events. The event relevant to the Taxpayer's circumstances is G3. Subsection 104-145(1) provides that: CGT event G3 happens if you own shares in a company, or financial instruments issued by or created by or in relation to a company, and a liquidator or administrator of the company declares in writing that the liquidator or administrator has reasonable grounds to believe (as at the time of the declaration) that: a) for shares - there is no likelihood that shareholders in the company, or shareholders of the relevant class of shares, will receive any further distribution for their shares; or b) for financial instruments - the instruments, or a class of instruments that includes instruments of that kind, have no value or have only negligible value. Subsection 104-145(2) provides that the time of the event is when the declaration was made. Subsections 104-145(4) and (5) provide that you can choose to make a capital loss equal to the reduced cost base of your shares as at the time of the declaration, and that if you make that choice: • the cost base and reduced cost base of the shares or financial instruments are reduced to nil just after the declaration. Therefore, in order to choose to make a capital loss due to CGT event G3, each of the following elements must be satisfied: • There must be a relevant asset. A taxpayer must own: i. shares in the company; or ii. a financial instrument issued by, or created by, or in relation to, the company. • There must be a relevant liquidator or administrator 'of the company'. • The liquidator or administrator must declare in writing that they have reasonable grounds to believe the relevant matter in paragraph 104-145(1)(a) or (b) applies to the asset in question. • The taxpayer must choose to make a capital loss. For shareholders who own valueless shares (or valueless financial instruments) in companies in liquidation or administration, the effect of choosing to apply CGT event G3 is that it enables those taxpayers to accelerate a capital loss to the time of the relevant written declaration, which may not otherwise arise until the loss is actually realised under another CGT event at some time in the future (such as the ultimate disposal by cancellation of the shares, or when the company is deregistered). However, the shares or financial instruments continue to be held with a zero cost base, so that if a distribution on the shares or payment under the financial instrument is subsequently received, a capital gain may be realised, but no further capital loss. If a taxpayer does not choose to make a capital loss under CGT event G3, no capital loss will be made until the share or security is disposed of, which is usually when the company is dissolved. | Detailed Reasoning - Relevant Asset: Company A holds shares in Company B, and therefore holds a relevant asset for the purposes of CGT Event G3. | Detailed Reasoning - Is there a relevant liquidator or administrator 'of the company': On the facts provided, the Commissioner must determine whether Person X (as Manager of the Assignee) is an administrator or liquidator of Company B, for the purposes of section 104-145. Liquidator is defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) as meaning: • the person who, whether or not appointed as liquidator , is the person required by law to carry out the winding-up of a company. However, subsection 6(1AA) of the ITAA 1936 provides that so far as a provision of the ITAA 1936 gives an expression a particular meaning, the provision does not also have effect for the purposes of, relevantly, the ITAA 1997. As 'liquidator' is not defined in the ITAA 1997, it takes its ordinary meaning, which the Macquarie Dictionary defines similarly as: • noun a person appointed to carry out the winding up of a company. The Explanatory Memorandum to the Tax Laws Amendment (2004 Measures No. 6) Bill2004 introduced the amendments to section 104-145 which expanded the scope of the provision from declarations made by liquidators only, to declarations made by administrators as well. It outlined the difference in those roles, relevantly including a reference to the liquidator's role as: 8.10 A liquidator is appointed under Chapter 5 of the Corporations Act 2001 to wind up a company. The Corporations Act 2001 does not contain a single comprehensive definition of liquidator, however its meaning is established through several provisions regarding their duties in Chapter 5.4 - Winding Up in Insolvency. Relevantly, subsection 495(1) states that a liquidator is appointed for the 'purpose of winding up the affairs and distributing the property of the company'. Chapter 5 of the Corporations Act 2001 concerns external administration. Accordingly, only liquidators that are appointed to undertake an external administration of a company are capable of making a determination for section 104-145 purposes. This is arguably suggesting that liquidators that have not been 'appointed' or have been engaged otherwise than to undertake an external administration are not considered capable of making a declaration for section 104-145 purposes. Relevantly, the Commissioner has previously considered the possibility of CGT Event G3 occurring where shares in a non-resident company are worthless, in ATO ID 2001/800 Capital gains tax: capital losses: shares in non-resident company . The implication therein is that a written declaration made in a liquidation of an overseas company might qualify as CGT event G3, in circumstances where a liquidator or administrator had not been appointed under the Corporations Act 2001 . On the facts, the Commissioner considers that when Company B made a general assignment for the benefit of its creditors to the Assignee, pursuant to the laws governing the ABC, it appointed a liquidator to wind up the company. The agreement transferred ownership, custody and control of all of Company B's assets to the Assignee, an independent third party, who acts as a fiduciary for the creditors' benefit. The appointed Manager of the Assignee, Person X, is an insolvency professional and is considered capable of making the declaration contemplated in subsection 104-145(1). Accordingly, the Commissioner considers that there is a liquidator of the relevant company, Company B, for the purposes of section 104-145. | Detailed Reasoning - Is there a 'declaration': The ATO has issued several pieces of public guidance around what a declaration should include and its form for the purposes of subsection 104-145(1). On the form it should take, Taxation Determination 92/102 Income tax: capital gains: in what format should a declaration by a liquidator under section 160WA be made? provides that the declaration: • must be in writing; • include the date the declaration is made, and • should include that he or she has reasonable grounds to believe that there is no likelihood that all the shareholders, or shareholders of a particular class, will receive any distribution in the course of winding up the company. In terms of shareholders being notified, Taxation Determination 92/101 Income tax: capital gains: how may shareholders be notified of a liquidator's written declaration under section 160WA? provides that there is no requirement for shareholders to be notified of the existence of a written declaration by the liquidator individually or collectively, and that it can be made by public meeting, media release, public notice in newspaper, letter, or any other means that they choose. For the avoidance of doubt, Taxation Determination 2000/52 Income tax: capital gains: can CGT event G3 in section 104-145 of the Income Tax Assessment Act 1997 happen - enabling a shareholder to crystallise a capital loss on their shares in a company - if a liquidator declares that they expect to make a distribution during the winding up of the company? provides that for CGT event G3 to occur, the liquidator of a company must declare that they have reasonable grounds to believe, at the time of the declaration, there is no likelihood that shareholders in the company (or shareholders of the relevant class of shares) will receive any further distribution in the course of winding-up the company. This guidance clarifies that where there is an expectation that a distribution, however small, may be made in the future, the liquidator's declaration will not be valid for the purposes of CGT event G3. On the facts, the declaration made by the liquidator of Company B is: • in writing; • dated; • in the form of a letter; • does not allude to the possibility of any future distribution; • not invalidated by Company A not being informed at the time it was made, and • includes the necessary requirement that the liquidator has reasonable grounds to believe there is no likelihood that all the shareholders or shareholders of a particular class will receive any distribution in the course of winding up the company. Accordingly, the liquidator of Company B has made a declaration which meets the requirements of paragraph 104-145(1)(a) in relation to Company A's shares in Company B. Consequently, CGT Event G3 happened on the date the declaration was made in respect of Company A's shareholding in Company B. | Detailed Reasoning - Question 2: Generally, a choice available under the CGT provisions, once made, cannot be changed, and must be made by the time the income tax return is lodged, or within such further time as the Commissioner allows (subsection 103-25(1)). However, ATO Interpretative Decision 2003/103 Capital Gains Tax: Choice and the small business roll-over clarifies that a taxpayer who has not made a choice under the CGT provisions in its income tax return does not reflect their choosing not to make it, rather it reflects them not having made any choice. If the Commissioner allows further time, they may later make a choice under the provisions and amend their return accordingly. In determining if the discretion to allow further time should be exercised, the Commissioner has considered the following factors: • evidence of an acceptable explanation for the period of extension requested (and whether it would be fair and equitable in the circumstances to provide such an extension), • prejudice to the Commissioner which may result from the additional time being allowed (but the mere absence of prejudice is not enough to justify the granting of an extension), • unsettling of people, other than the Commissioner, or of established practices, • fairness to people in like positions and the wider public interest, • whether any mischief is involved, and • consequences of the decision. After considering the relevant circumstances and factors, the Commissioner considers it appropriate to grant an extension of time to allow Company A to make a choice to make a capital loss in the XXXX income year. The choice was not made within the required time because Company A was not aware of the declaration, or the fact of Company B's ABC and insolvency process. Company A was not aware a choice was available and did not consider thechoice in the lodging of the relevant year's tax return, and cannot be said to have made a choice at all.There would be no prejudice to the Commissioner or unsettling of people by allowing the extension. There is no mischief involved. The Commissioner considers it fair and equitable in these circumstances to exercise the discretion.