Private ruling: CGT - investment loss
Published: October 2014
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to claim a capital loss on a failed investment? | A1: No.

Relevant facts and circumstances: You invested a sum of your parent's money, with their consent. Your parent gave you power of attorney to act on their behalf in relation to the investment. A memorandum of understanding (MOU) was executed between yourselves and the company. The MOU states that the money will be invested with interest rate of X% per annum. The company invested this amount along with their investment to a property investment broker. A couple of years later, you received the first interest payment. A number of months later, you received a second interest. No further interest payments have been made, despite several requests. You have issued a formal letter to the company requesting the return of the investment with prorated outstanding interest. You have continued to follow up on the status of the returned invested with no success. Recently, you were informed that the investment has been lost and there is no way of recouping or repaying any funds. One of the proprietors of the company has now closed the door to any further communication.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-20.

Reasons for decision: Summary: You make a capital gain or capital loss if, and only if, a capital gains tax event (CGT) happens to a CGT asset that you have an ownership interest in. The gain or loss is made at the time of the CGT event. CGT events cover a wide variety of situations. The most common CGT event is the one that arises when a person disposes of their ownership interest in a CGT asset (CGT event A1 ). In your case, you invested your parent's money, under a power of attorney arrangement. You did not have an ownership interest in the investment therefore no CGT event has happened to you. Accordingly, you are not entitled to claim a CGT loss.