Income tax: capital gains: does the expression 'loss or destruction' for the purposes of CGT event C1 in section 104-20 of the Income Tax Assessment Act 1997 apply to: a) a voluntary 'loss' or 'destruction'? b) intangible assets?

The word 'loss' for the purposes of CGT event C1 (about the loss or destruction of CGT assets) in section 104-20 of the Income Tax Assessment Act 1997 does not contemplate voluntary actions. The Macquarie Dictionary defines 'loss' as 'the accidental or inadvertent losing of something dropped, misplaced, or of unknown whereabouts; destruction or ruin'. The word in its context in CGT event C1 suggests an involuntary rather than a voluntary act.

The term 'loss' in section 104-20 is wide enough to cover some situations where an asset is confiscated. However, other situations involving confiscation may amount to forfeiture (CGT event C2 - about cancellation, surrender and similar endings - in section 104-25) or a change of ownership (CGT event A1 - about disposals of CGT assets - in section 104-10), so that the circumstances of each case determine the relevant CGT event.

The word 'destruction' in section 104-20 contemplates voluntary actions. The Macquarie Dictionary defines the word 'destruction' as 'the act of destroying; the fact or condition of being destroyed; demolition; annihilation'. The word in its context in CGT event C1 applies if a destruction is an involuntary occurrence, such as a natural disaster, or if it happens by the actions of others over which the taxpayer has no control. It also applies if a destruction is a voluntary occurrence - if, for example, it happens due to a deliberate act of the taxpayer (e.g., a taxpayer might demolish a building in the course of redeveloping a property).

Neither of the words 'loss' or 'destruction', in the context of CGT event C1, contemplates an economic loss of a CGT asset or damage to an asset that does not amount to the loss or destruction of the asset.

A CGT asset must be completely lost to the owner or completely destroyed for the circumstances to be covered by CGT event C1.

CGT event C1 does not distinguish between tangible and intangible assets. Section 104-20 refers to 'CGT asset' and this includes intangible CGT assets.

We invite you to comment on this Draft Taxation Determination. We are allowing 4 weeks for comments before we finalise the Determination. If you want your comments considered, please provide them to us within this period. Comments by Date: 24 September 1999 Contact officer details have been removed following publication of the final ruling.