Private ruling: CGT loss - investment scam
Date of advice: 17 April 2026
Published: 6 July 2026
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Can the Trust 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: The applicant is the Trustee of a Family Trust (Trustee). The Trustee was seeking to invest surplus funds of the Trust. The Trustee corresponded with a broker who claimed to be representing an Investment Company and subsequently offered investment opportunities. The Trustee undertook due diligence and was provided with marketing materials, contract notes and other documentation related to the proposed investment. 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 investment was legitimate. On DDMMYYYY the Trustee transferred $ X from the Trust's 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. The Trust believed the funds were used to purchase Bank B bonds and a contract note was issued in the name of the Trust. The documentation included ticket numbers and an international Securities Identification Number (ISIN), corresponding to an actual bond issued by the Bank B. The investment was represented as maturing in early MMYYYY. In anticipation of the maturity the Trustee contacted the broker in early MMYYYY to confirm how repayment of the investment would be facilitated. From that point onwards, all communications with the impersonators of the Investment Company ceased. After repeated unsuccessful attempts to make contact, the Trustee became concerned and engaged the Trust's tax agent to review the legitimacy of the investment and assess recovery options. That review identified that the Australian Securities and Investments Commission (ASIC) had issued a public warning on DDMMYYYY stating that the Investment Company may have been subject to impersonation by scammers. This warning was published after the funds had already been transferred. The Trustee subsequently contacted both their own bank and Bank A to recover the funds. The Trustee was advised that due to the time elapsed, the funds could not be recovered. The loss was discovered in MMYYYY when repayment was not received following the represented maturity date and communications with the impersonators of the Investment Company ceased. 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. The fraud was reported to the Australian Cyber Security Centre on DDMMYYYY and to the Queensland 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: Detailed Reasoning - Part 3-1 establishes the capital gains tax (CGT) framework by identifying CGT assets and how gains or losses are calculated.: 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 is made at the time of the CGT event. 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 contractual right acquired when the Trust transferred funds to the purported Investment Company. | Detailed Reasoning - Section 104-5 lists the CGT events that can happen in relation to a CGT asset.: 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)). 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)). | Detailed Reasoning - The words 'lost' and 'destroyed' are not defined in the Income Tax Assessment Acts and therefore take their ordinary meaning.: 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 for the purposes of 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. | Detailed Reasoning - Application to your circumstances: The Trust acquired a CGT asset for the purposes of section 104-20 when it invested $ X through a broker with an entity represented to be the Investment Company, following the transfer of funds on DDMMYYYY. While documentation provided at the time gave the appearance of a legitimate bond investment, repayment was not received on the represented maturity date in early MMYYYY and communications with the purported investment entity ceased. Subsequent inquiries, including an ASIC public warning and confirmations from the Trust's bank and the receiving bank, established that the investment had been lost as a result of a scam and that there was no realistic prospect of recovery or compensation. The fraud was reported to the Australian Cyber Security Centre and to the State Police Service. In these circumstances, CGT event C1 occurred under section 104-20 when the loss was discovered in MMYYYY. This was the point at which the Trust became aware that the investment had been irretrievably lost, and it was established that recovery of the funds was not possible. The Trust calculates its capital loss from CGT event C1 by comparing any capital proceeds received with the reduced cost base of the CGT asset being the $X that is lost. 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.