Private ruling: Capital losses
Date of advice: 1 May 2026
Published: 6 July 2026
Ruling period: Year ending DDMMYYYY

Ruling: Q1: Can you claim a capital loss under Part 3-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as a result of entering into an investment scam? | A1: Yes.

Relevant facts and circumstances: 1. You sought to invest surplus personal funds. 2. You corresponded with a broker who claimed to be representing an Investment Company and subsequently offered investment opportunities. 3. You undertook due diligence and were provided with marketing materials, contract notes and other documentation related to the proposed investments. This documentation included an Australian address, an ABN, and an Australian Financial Services Licence number presented as belonging to the Investment Company, giving the impression that the investments were legitimate. 4. On DDMMYYYY, you transferred $ X from your personal bank account to an account held with Bank A under the name of Company A, using a reference purported to be provided by the Investment Company. 5. On DDMMYYYY, you transferred a further $ X to the same account, bringing the total amount invested to $ X. 6. You believed the funds were used to purchase fixed-interest bonds issued by Australian banks, and a contract note was issued in your name. The documentation included ticket numbers and an International Securities Identification Number, corresponding to an actual bond issued by an Australian banking institution. 7. The investments were represented as maturing on DDMMYYYY. 8. In anticipation of the maturity date, you attempted to confirm how repayment of the investments would be facilitated. From that point onwards, communications with the impersonators of the Investment Company ceased. 9. After repeated unsuccessful attempts to make contact, you became concerned and engaged your tax agent to review the legitimacy of the investments and assess recovery options. 10. That review identified that the Australian Securities and Investments Commission had issued a public warning stating that the Investment Company may have been subject to impersonation by scammers. 11. You subsequently contacted both Bank B and Bank A to recover the funds. You were advised that, due to the time elapsed, the funds could not be recovered. 12. The loss was discovered when communications with the purported investment entity ceased and it became apparent, based on information from relevant authorities and financial institutions, that the funds could not be recovered. 13. Based on information provided by the relevant authorities and financial institutions, there is no realistic prospect of recovery or compensation in relation to the funds. 14. The fraud was reported to the Australian Cyber Security Centre on DDMMYYYY and to the State Police Service on DDMMYYYY.

Relevant legislative provisions: Income Tax Assessment Act 1997 Part 3-1 | Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 104-5 | Income Tax Assessment Act 1997 section 104-20 | Income Tax Assessment Act 1997 section 108-5

Reasons for decision: Summary: Yes. You are entitled to claim a capital loss under Part 3-1 as a result of entering into an investment scam. | Detailed Reasoning - Detailed reasoning: 15. Part 3-1 establishes the capital gains tax (CGT) framework by identifying CGT assets, CGT events and how capital gains or losses are calculated. 16. Section 102-20 in Part 3-1 provides the core principle that a capital gain or capital loss arises if, and only if a CGT event happens, with the gain or loss made at the time of the CGT event. 17. CGT assets are defined broadly in section 108-5 and include any kind of property or a legal or equitable right that is not property. This definition extends to the right you acquired when you transferred funds to the purported Investment Company. 18. Section 104-5 lists the CGT events that can happen in relation to a CGT asset. 19. Relevantly, CGT event C1 in subsection 104-20(1) happens if a CGT asset you own is lost or destroyed. The time of the CGT event C1 is when compensation is first received for the loss. If no compensation is received, the time of the event is when the loss is discovered, or the destruction occurred (subsection 104-20(2)). 20. A capital gain or loss from CGT event C1 happening is determined by calculating the difference between the capital proceeds received on the happening of the event and the cost base or reduced cost base of the CGT asset that is lost or destroyed (subsection 104-20(3)). 21. The words 'lost' and 'destroyed' are not defined in the tax law and therefore take their ordinary meanings. 22. Taxation Determination TD 1999/79: Income Tax: capital gains: does the expression 'lost' or 'destroyed' for the purposes of CGT event C1 in subsection 104-20(1) of the Income Tax Assessment Act 1997 apply to: (a) a voluntary 'loss' or 'destruction'? (b) intangible assets? (TD 1999/79) clarifies the meaning of lost and destroyed in subsection 104-20(1). At paragraph 2 it states: The word 'lost' in its context in subsection 104-20(1) does not contemplate voluntary actions. The Macquarie Dictionary , 3rd ed, defines 'lost' as '1. past tense and past participle of lose' and defines 'lose' as '1. to come to be without, by some chance, and not know the whereabouts of: to lose a ring'. The word in its context in CGT event C1 suggests an involuntary rather than a voluntary act. 23. Paragraph 7 of TD 1999/79 confirms that CGT event C1 does not distinguish between tangible and intangible CGT assets. | Detailed Reasoning - Application to your circumstances: 24. You acquired a CGT asset when in MMYYYY you invested $ X through a broker with an entity represented to be the Investment Company. While documentation provided at the time gave the appearance of a legitimate bond investment with a stated maturity date in MMYYYY, subsequent events established that the purported investment did not exist. 25. By MMYYYY, communications with the purported investment entity had ceased, ASIC had issued a public warning regarding impersonation of the Investment Company, and confirmations from Bank B and Bank A indicated that recovery of the funds was not possible. The fraud was reported to the Australian Cyber Security Centre and to the State Police Service. 26. In these circumstances, CGT event C1 occurred under section 104-20 when the loss was discovered in MMYYYY. This was the point when you became aware that the investment funds had been irretrievably lost, and it was established that any recovery of those funds was not possible. 27. You calculate your capital loss from CGT event C1 by comparing any capital proceeds received with the reduced cost base of the CGT asset. 28. Any capital loss arising from CGT event C1 may be applied to offset capital gains in the YYYY income year or carried forward to be applied against future capital gains.

Reasons for decision: All legislative references are to the Income Tax Assessment Act 1997 unless otherwise stated. | Question 1: Can you claim a capital loss under Part 3-1 as a result of entering into an investment scam?