A technical specialist has confirmed SMSF members who have been victims of an investment scam may be eligible for favourable tax treatment of the resulting loss in certain situations.
Heffron head of education and content Lyn Formica used a real-life example to illustrate her point, where an SMSF member, Aiden, decided to part take in an overseas investment opportunity only to find out later it was a scam. Unfortunately, he received no returns from the scheme and lost the capital outlay for the investment.
“You can’t get a tax deduction for a situation like Aiden’s because this is a capital event effectively. I think there is the potential for a capital loss in this particular situation, but it will always depend on the circumstances,” Formica told delegates at the Heffron Super Intensive Day 2024 held in Sydney last week.
To this end, she noted the elements needing to be satisfied in order for a capital loss to be recorded.
“To have a capital loss we need to have a CGT (capital gains tax) asset in the first place. So we need to have a situation where Aiden had a CGT asset which was then lost and was not recoverable,” she said.
“In his particular circumstances, I think we do actually have a CGT asset because essentially we’ve got a debt between the superannuation fund and the scam investment company he sent the money to.
“Once Aiden realises that money is not recoverable, that’s when he can realise that capital loss and write off that particular asset.”
However, Heffron senior SMSF specialist Annie Dawson emphasised there are certain situations where no tax relief will be available to a member who has been a victim of a scam.
“We have also had clients who have just had money stolen from their bank account. So someone has hacked their account. They can’t get a capital loss for that,” Dawson said.
Formica added: “That’s correct. That’s not tax deductible because it’s not a capital loss if you’ve just had money stolen out of the SMSF’s bank account.”
