All articles / Edited private advice
Weekly Private Advice · Issue #1

Four pieces of edited private advice, unpacked

Scam losses for an individual and for a family trust, cryptocurrency as a personal use asset, and a foreign trust distribution under section 99B.

Written by
Andrew Lovett
Andrew Lovett
Founder, Tony.Online
22 September 2026 · 8 min read

About this series: We go through the edited private advice the Australian Tax Office publishes, select the most relevant and set out what it means. Each one records the Commissioner’s decision for a single taxpayer on a single set of facts, so it shows you the approach rather than giving you authority to rely on. Each summary carries its authorisation number. Andrew’s full disclaimer is at the foot of this article.

In this issue

01Capital losses: investment scam (individual)02CGT loss: investment scam (family trust)03Cryptocurrency: personal use asset04Foreign trust distribution
A laptop seen from above, hands at the keyboard, the screen filled with code
★  Advice of the week

1. Capital losses: investment scam (individual)

Authorisation 1052535975496 · 1 May 2026

Questions

Can the taxpayer claim a capital loss as a result of entering into the scam?

Answers

Yes.

Facts

The taxpayer lost money to an investment scam. They transferred funds to what appeared to be a legitimate investment company. The documentation included an Australian address, an Australian Business Number (ABN), and an Australian Financial Services Licence number presented as belonging to that company, and a contract note carrying an International Securities Identification Number (ISIN) matching an actual bond issued by an Australian bank. The investment never existed.

Explanation

Identification of the asset: A capital gains tax (CGT) asset is defined broadly. It includes any kind of property and any legal or equitable right that is not property. When the taxpayer transferred the funds, they acquired a right of that kind. That right is a CGT asset, even though the underlying investment never existed.

Recognition of the event: CGT event C1 occurs when a CGT asset you own is lost or destroyed. The words “lost” and “destroyed” are not defined in the tax law, so they take their ordinary meaning. Taxation Determination TD 1999/79 confirms that “lost” in this context suggests an involuntary rather than a voluntary act, and that CGT event C1 does not distinguish between tangible and intangible assets. A scam victim has not voluntarily disposed of anything.

Timing of the event: The event occurs when compensation is first received for the loss. Where no compensation is received, the time of the event is when the loss is discovered. Here, communications with the purported investment company had ceased; the Australian Securities and Investments Commission (ASIC) had published a warning that the company was being impersonated; and both banks had confirmed the funds could not be recovered.

Calculation of the loss: The capital loss is the difference between any capital proceeds received and the reduced cost base of the asset.

Implications

The legislation times the event at the discovery of the loss, not at the transfer of the funds. The loss therefore belongs to the income year in which it was discovered, not the year the money was transferred. If a client transferred funds in one income year and only recognised the loss in the next, the claim goes in the discovery year.

Under the legislation, a capital loss offsets capital gains in the year of the event and otherwise carries forward to future years. A capital loss does not reduce ordinary income, such as salary or business income.

The outcome turned on the evidence. The Tax Office relied on a published ASIC warning naming the impersonated entity, confirmation from both banks that recovery was impossible, and dated reports to the Australian Cyber Security Centre and to state police. Those facts fixed both the discovery date and the absence of any realistic prospect of recovery. A client still in an active recovery process may not yet have had the event occur, because the loss may not yet be recognised.

Also this week

Three more pieces of edited private advice. Open each one for the answer and the reasoning.

02

2. CGT loss: investment scam (family trust)

Authorisation 1052529278517 · 17 April 2026

Questions

Can the trust claim a capital loss arising from the scam?

Show the answer and reasoning

Answers

Yes.

Facts

The taxpayer is the trustee of a family trust. The trustee invested surplus trust funds through the same broker pattern: convincing documentation, a contract note matching a real bond, a represented maturity date, then silence from the counterparty.

Explanation

The reasoning is the same as for the individual. The trust acquired a CGT asset, being a legal or equitable right, when it transferred the funds. CGT event C1 occurred when that asset was lost. The loss was discovered when repayment was not received after the represented maturity date, communications ceased, the ASIC warning was identified, and both banks confirmed recovery was impossible. The capital loss is measured against the asset’s reduced cost base.

Implications

The investor’s character did not change the outcome. The same analysis applies whether the investor is an individual or the trustee of a family trust. The timing rule in the legislation is the same: the loss belongs to the year of discovery. The evidence that did the work is of the same kind: regulator warnings, bank confirmations, and dated reports to the authorities.

03

3. Cryptocurrency: personal use asset

Authorisation 7915174230435 · 16 April 2026

Questions

Was that cryptocurrency a personal use asset?

Show the answer and reasoning

Answers

Yes.

Facts

The taxpayer bought vehicle engine parts in Australia as a favour for people they were staying with overseas, because the parts could not be bought locally. Their hosts repaid them in cryptocurrency to avoid international banking fees. The taxpayer set up a crypto account solely to receive the repayment, disposed of the entire holding within hours, deleted the app immediately afterwards, and has not traded since.

Explanation

A personal use asset is a CGT asset, other than a collectable, that is used or kept mainly for personal use or enjoyment.

The relevant time for the test is when the asset is disposed of. The Tax Office weighs four things: the initial intention, the use and intention during the period of ownership, the length of time the asset was owned, and what happened on disposal.

The two categories are mutually exclusive. An asset acquired or held mainly as an investment, as part of a business, or for a profit-making purpose, cannot be a personal use asset.

Applied here, the cryptocurrency was received as a one-off private reimbursement for the engine parts. The entire holding was disposed of within hours. The taxpayer deleted the app, has not traded since, and does not intend to do so. The Tax Office accepted that the cryptocurrency was a personal use asset at the time of disposal.

Implications

Under the legislation, the consequences cut both ways. Capital gains on a personal use asset are disregarded where the first element of the cost base is $10,000 or less. Capital losses on personal use assets are disregarded entirely (subsections 118-10(3) and 108-20(1)).

The facts were narrow: the outcome turned on a one-off receipt, immediate disposal, and no trading history. A client who held cryptocurrency for months, or traded more than once, would not fit this pattern.

04

4. Foreign trust distribution

Authorisation 1052529941595 · 20 April 2026

Questions

  • Is the payment assessable in Australia?
  • Is the assessable amount reduced by the part of the distribution that represents the corpus of the trust?
Show the answer and reasoning

Answers

Yes to both.

Facts

The taxpayer is an Australian resident. They received a lump sum from a foreign discretionary trust. The trust had been established overseas by their late parent, using lottery winnings, and had invested in term deposits.

Explanation

Section 99B deals with trust amounts that have not previously been taxed in Australia. It applies where an Australian resident receives a payment from a foreign trust. The payment is included in the resident’s assessable income.

Subsection 99B(2) then reduces that amount. The part of the distribution that represents the corpus, being the capital of the trust represented by its assets, is excluded. But there is an exception. Accumulated earnings, such as interest on term deposits, are not excluded because they represent income that would have been taxed if an Australian resident had derived it.

Applied here, the portion of the lump sum representing the capital originally settled into the trust is excluded from assessable income. The portion representing earnings on those funds is included. The taxpayer includes the distribution in their return and excludes the corpus component. They may also be entitled to a foreign income tax offset for any foreign tax paid.

Implications

The split between corpus and earnings depends on evidence. The Tax Office pointed to Practical Compliance Guideline PCG 2024/3 for the evidential and record-keeping requirements. Without records showing what capital was contributed to the trust and what the earnings are, there is no defensible way to carve out the corpus. In practice, ask for that history early, because it is usually held offshore by someone else.

The legislation includes a second reduction in addition to the corpus carve-out. Paragraph 99B(2)(b) excludes amounts that would not have been assessable if an Australian resident had derived them. It was not needed here, but it should be checked on other facts.

The Tax Office position, set out in Taxation Determination TD 2018/9, is that until the trustee appoints income to them, a beneficiary of a discretionary trust has only a right to be considered by the trustee. At that stage, there is no right to demand payment. Once the trustee resolves to appoint income and the beneficiary is made presently entitled, the position changes: the beneficiary then has a present legal right to demand and receive payment. That timing affects the year in which the distribution is assessed.

Disclaimer: We believe this information is correct at the time of publication. It is general in nature, for guidance only, and is not intended as personal advice. It should not be relied upon without professional advice about your direct circumstances. No responsibility can be accepted by any publisher, author, editor, contributor, or consultant for loss directly or indirectly arising from any person acting or refraining from acting wholly or partly upon the material in this publication, or for any error, broken link, or omission from the publication. Edited private advice is published by the Tax Office in modified form. It is based on private rulings that apply only to the taxpayer who applied. It is not a public ruling and cannot be relied upon by another taxpayer. This publication is general information for Australian tax professionals only; it is not tax, financial, or legal advice. It is not suitable for other people.

Andrew Lovett
Written by
Andrew Lovett
Founder, Tony.Online · Director, Lovetts · Registered Tax Agent

Two decades working across every entity type, and a computer-science background that turned into Tony.Online, the tireless second analysis he always wished he had.

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