Private ruling: Capital gains tax
Date of advice: 11 October 2021
Published: December 2021
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Have capital gains tax events C1 and A1 occurred on the sale of shares in a managed fund portfolio because of the financial advisor's error? | A1: Yes. In your situation, the sale of shares triggered CGT event A1, and CGT event C1 was also triggered because the shares were lost due to an involuntary occurrence. When more than one CGT event occurs, you use the event most specific to your circumstances. The most specific event in your situation is CGT event C1. | Q2: Is the taxpayer eligible to apply rollover relief under subdivision 124-B of the ITAA 1997 to the capital gain resulting from the disposal of shares? | A2: Yes. Division 124 of the ITAA 1997 allows for a replacement asset roll-over to defer the making of a capital gain or loss from a CGT event happening until a later CGT event in certain circumstances. You can choose a roll-over where the original CGT asset is lost. In your situation, you meet the requirements to choose a roll-over to be applied to the capital gain resulting from the erroneous sale of the original shares. The original shares were lost, you received compensation and the portfolio was repurchased within the same income year in which the erroneous sale occurred. The repurchased portfolio did not become trading stock nor were they depreciating assets or registered emissions units.

Relevant facts and circumstances: The taxpayer is an Australian resident company. The company currently operates as a private investment company with various investments held on capital account. During the 20XX financial year, the company changed investment advisors. As part of the change, the managed fund portfolio held since the 20XX financial year was to be transferred across as an in-specie transfer from the initial portfolio platform to the new advisor's platform. Instead of the portfolio itself being transferred to the new platform, the former advisor sold the portfolio into cash and transferred the cash across to the new platform. Upon realising the error, the new advisor instructed the former advisor to attempt to repurchase as closely as possible the same number of units and shares for each originally held investment.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-20 | Income Tax Assessment Act 1997 Subdivision 124-B | Income Tax Assessment Act 1997 section 124-10 | Income Tax Assessment Act 1997 section 124-70 | Income Tax Assessment Act 1997 section 124-75