Delisted company from the ASX - capital gain loss tax writeoff?

If the ASX delists a company for whatever reason (eg. fraud of directors, company not responding adequately to ASX queries, etc.) does that mean as a share holder of those shares and as an option holder of that company issued options then you will be able to write it off 100% as a capital loss in that financial year?

 

not necessarily.

 

Just because the company has been delisted from the ASX does not necessarily mean that the shareholders can claim a capital loss in their tax return.

In order for the shareholders to claim a capital loss there must be a CGT event in relation to their shares. The following would trigger a CGT event for the shareholders:

- CGT event A1: The shareholder disposes of their shares;

- CGT event C2: The shares are cancelled when the company is deregistered under the Corporations Act;

or

- CGT event G3: The administrator or liquidator declares in writing that the shares are worthless (ie, shareholders not likely to receive any further distributions).

If none of these events occurred prior to 30 June then you would not be able to claim a capital loss in tax return. They would only be able to claim a loss when one of these events has been triggered.

 

Transfer (sell) them to your spouse.

 

Someone put a link up a few weeks ago about a company that specialises in buying useless shares - so the Capital loss can be realised.

 

Delisted.com.au

 

Ok thanks for all who replied. Is this legal to do? Sell them to a related party for $1 and claim a big capital loss? lol

 

Why wouldn't it be legal? CGT is based on market value though.

 

Some companies leave the members register open to off market changes. The liquidator can advise if the members register is open.

There is another way that involves a change of beneficial ownership (without a change of legal ownership) so that the share is held on trust but unless you have a trust setup and it has specific characteristics this option doesnt work well due to costs. It can work well for a child to be given beneficial ownership for shares held in a parents name. Legal documentation is important.

The key issue is how to determine value. Most delisted shares are not valueless. Most delistings are takeovers. It is takenover by another listed or unlisted entity - That can take quite some time. And if its unlisted the value may be difficult to determine and really hard to find. Thats where delisted.com helps. Pasminco Mining was a good example of that. It was a mining company well regarded and listed on the ASX that collapsed. It took many years before another entity listed (Zinifex) and issued shares to former shareholders after a successful court decision. Ironically it changed name to Pasmino too and then later collapsed too. This is why CGT event G3 requires patience. Only after the liquidator issues a notice can the loss be triggered. A historical list can be found here : Loss Declarations by Administrators and Liquidators | deListed Australia

Selling the apparently valueless shares for $.01 is not a scheme if you have a genuine basis to value them at $0.01. A suspended listing may lack that objective basis. But a series of preliminary liquidators notices (NOT early administration as that is too early) which suggest creditors may get cents in the dollar may suffice to form the view the shares will have no material value at the time of transfer.

 

Thanks for the above info Paul

Selling the shares to a related party seems like a good idea when possible. That way don't need to pay Delisted.com.au a $150 fee to do it and if for whatever reason those shares trade again or becomes worth something, the family member can make a profit from it rather than Delisted.com.au getting a $150 fee and making a profit on those shares down the track.

 

Delisted once didnt charge a fee. It was once a service of the Australian Shareholders Assn inconjunction with Taxpayers Australia.

Yes if there is hope for resurrection a spouse or child may be a better choice.

Can a SMSF acquire them? No. Since the shares wont be listed AND have a market value the fund cannot comply with s66 of SIS. (I have been asked this many times)

 

How do you actually transfer the shares to a family member or find out if the shares exist once the company is delisted?

 

By contract or deed.

 

The company needs to be sent the share transfer form (https://www.platinum.com.au/PlatinumSite/media/Find-a-form/trf_form.pdf) so it can update the register of members. This form may act as the contract required of tax law. You can check with the share registery or the liquidator / administrator.

Delisted.com.au will likely provide details of the current registry or parties

 

A form is not a good contract. This is where a lot of things fall over where shares are transferred and not documented properly and no consideration is actually paid. Also transfer of title is only the trigger for cgt where there is no contract. Date of contract is generally the date of the cgt event if there is a contract.

 

Brokers have been doing this for decades and the ATO have never had issue. On market and off market trades occur every day - Millions of them. Brokers also do off market dark pool trades which they self-cross. Acting as broker for buyer and seller without a meeting of the minds of the two parties to make a contract between themselves. A good example of the inability of two parties to contract is bitcoin but the holistic approach (bizarre but an example is SMSFR 2010/1 and other rulings) adopted by the ATO is that the exchange acts as a contracting party for event A1. Claytons contracts to use the old expression !!

A transfer that is signed by both parties, dated and settled with an agreed price based on market value (market value substitution rule !) meets the requirements of CGT event A1 in most (but certainly not all) cases . In the absence of that contract required by tax law (s104-10) the modified requirement is that the owner CEASES to be a owner. Hence a contract is preferred for a delisted entity that may be unable or even unwilling to amend its register of shareholders or unitholders.

There is also a concern when doing off market transfers. If Fred transfers to Fred & Mary only 50% may have been sold.

 

What about the legal issues