Private ruling: Capital loss - loan
Published: May 2012
Ruling period: Year ended 30 June 2011. | Year ended 30 June 2012.
Date scheme commenced: 1 July 2010.

Ruling: Q1: Can you claim a capital loss for repayment of the non-recourse loan? | A1: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 108-5

Reasons for decision: Summary: Capital gains tax (CGT) is the tax you pay on certain gains you make. It is not a separate tax and any capital gain that you make is included in your assessable income and taxed at your marginal tax rates. You make a capital gain or capital loss, if and only if, a CGT event happens to a CGT asset that you own. The most common event, CGT event A1, happens if you dispose of your ownership interest in an asset. You make a capital gain if the capital proceeds from the disposal of the asset are more than the assets cost base. You make a capital loss if those capital proceeds are less than the assets reduced cost base. For CGT purposes, a loan is considered a CGT asset for the lender and a liability for the borrower. When a loan is repaid, the borrower does not dispose of a CGT asset and therefore makes no capital gain or loss. In this case, you invested in a project through a non-recourse loan. This loan is a liability for you as the borrower, and not a CGT asset. When you made a payment to settle the loan, you did not make a capital loss. Therefore, you can not claim a capital loss for repayment of the non-recourse loan.

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. | Your initial investment in the project was through a non-recourse loan. | The loan books for the project were purchased by another company. | You were advised that the provisions of the non-recourse loan had been breached and they required payment for the loan. | You made a payment to the company as repayment of the loan and received a Deed of Release.