Private ruling: CGT asset / scam investment
Date of advice: 7 August 2024
Published: 16 September 2024
Ruling period: DD MTH YR
Date scheme commenced: DD MTH YR

Ruling: Q1: Did you acquire a CGT asset as defined in section 108-5 of the Income Tax Assessment Act 1997 (ITAA 1997) due to making the transfers to the investment company? | A1: Yes. You acquired a CGT asset in the form of a contractual right when you transferred the various amounts of money to the purported investment company. | Q2: Did CGT event C1 as defined in section 104-20 of the ITAA 1997 subsequently happen to the contractual right? | A2: Yes. CGT event C1 happened in respect of the contractual right when the contractual right came to an end. Section 104-20 of the ITAA 1997 outlines the rules for CGT event C1.

Relevant facts and circumstances: You have a self-managed superannuation fund where you invest in shares. These shares were historically profitable you relied on the dividends from these shares as your sole source of income for several years. You were enticed to invest your superannuation through a fund with a company named (A). (A) claimed that they managed superfunds, could provide advice surrounding share investments and you would get a better return investing overseas then investing in Australia. Upon the assurances of (A) as to their investment and management capabilities, you sold X of your share portfolios to invest this money through (A) as a conduit. You provided (A) upon their request your self-managed super fund details, including the name, Corporate Trustee name, ABN, TFN, registered fund address and further a list of your stocks. On the specified date, you received and email from (A) which contained trade account funding instructions and your client ID number. The beneficiary's name on the trade account funding transactions was (A) instead of in your name. You were advised by (A) there needed to be a minimum of $XX,XXX in your trading account before they could begin investing your funds. On the specified date, you transferred $XXXX into a (A) Advisory Account as per the trading instructions sent by (A). You then sent an email to (A) accounts manager requesting testimonials for (A) and this was never provided. On the specified date, a representative from the company emailed you stating the money had cleared into your new trading account. On the specified dates, under the direction of the trade account funding instructions from (A) you transferred a further $XXXX into the trading account each day. On the specified date, you transferred a further $XXXX into the same trading account also per the (A) trade account instructions. On the same day you emailed (A) accounts manager confirming the payments. They replied stating they had received $XXXX even though you transferred $XXXX. You had regular phone and email contact with (A), they further provided you with a website link to monitor how your investment was performing. On the specified date, you transferred a final $XXXX into the same account, this brought the total investment to the minimum threshold of $XXXX. On the specified date, (A) emailed you with a stock report of your current stocks, advising they would advise the traders review them and provide suggestions. Their advice was to sell most of your shares. You had a conservation with the (A) company representative where the advice remained as selling most of your portfolio. Upon receiving this advice, you sold more of your shares for cash. On the specified dates, you transferred $XXXX to the same (A) account under the direction of the trade account funding instructions from (A). On the specified date, you noticed that the portfolio on the (A) Account's website showed a balance of $XXXX instead of the $XXXX you had transferred. On the specified date, the (A) accounts manager responded to your email confirming that the balance was $XXXX. They further suggested that IT errors were the reason for the website not showing the true investment. On the specified date, you transferred $XXXX into the same (A) account under the direction of the trade account funding instructions from (A). An email was sent to the accounts manager to confirm they received this payment. You had now transferred $XXXX to the (A) account. On the specified date, • You sent an email to the (A) company representative requesting a call to confirm the fund status. As the website only showed the gain or loss of the stocks and not the investment particulars. • You then called the (A) company representative on their new number and email address they provided via email and they were never answered. Between the specified dates, you made numerous attempts to contact (A) in relation to the transferred funds and did not receive call backs from the representatives. On the specified date, another email was sent to the (A) company representative where they did not respond and the email bounced back stating the email address no longer existed. On the specified date, the (A) website where the investment was monitored was also taken down. You discussed (A) with a financial planner and requested if they had heard of the company or dealt with them. The financial planner followed your conservation with a call later that day and provided you a press release from ASIC which confirmed (A) was a fraudulent business and that you were scammed. On the specified date, you made a witness statement to the police force and provided a copy of all email communication with (A). You further engaged with a solicitor for legal advice, they confirmed (A) had been deregistered, you would not require their professional services as ASIC were pursing the matter. On the specified date, you received a letter from the liquidator who was pursuing the matter in relation to (A) known as (B). Advising they had not identified any assets or insurance policies to be pursued in respect of recoveries for creditors of (B). There is no prospect of recovering the investment income you transferred to purported company SMSF.

Relevant legislative provisions: Income Tax Assessment Act section 104-20 | Income Tax Assessment Act section 108-5 | Income Tax Assessment Act section 110-25 | Income Tax Assessment Act section 116-20