Resurrecting the dead

Tom Flower

The Gold Coast Bulletin

07 October 2002

While a failed investment offers little joy, it can at least give investors some tax relief – provided it is legally ‘dead’. Tom Flower reports.

To lose all the money you have invested in a share is a devastating experience, not to be able to write it off for tax purposes can make a bad thing worse.

That’s what can happen, though if you’re very unlucky.

Sometimes it’s hard to find the exact tax status of your failed investment. However, a new website, www.delisted.com.au, may be able to help you.

The website, run by Tony McLean, former executive officer of the Australian Shareholders’ Association, forms a kind of memorial park to companies that are deceased or near death.

Stanilite Pacific, for example, was removed from the stock exchange official list eight years ago, but shareholders who went down with the ship are still unable to write off their investment as a capital loss. This is because of continuing legal action against the auditors.

A similar situation applies to Harris Scarfe, which is delisted but subject to a class action against the directors.

The next directions hearing in this action is set down for December.

The usual trigger-point that allows investors to claim a tax loss, a liquidator’s declaration that there is no likelihood of any distribution to shareholders, has not yet happened with those companies.

Among the more recent failed investments, Pasminco (which has had administrators appointed) has not been formally delisted.

The administrators wrote to shareholders last month saying the company’s shares have no value, this falls short of a formal liquidator’s declaration, but is mighty close to it.

The administrators wrote: ”shareholders should seek their own advice regarding their ability to claim a tax write off.”

Pasminco’s creditors have agreed to exchange their debt for equity in a new holding company comprised of some existing Pasminco subsidiaries.

It is proposed that the new holding company will be floated on the stock exchange, with part of the equity being sold to public investors to provide cash to satisfy creditors’ claim.

The company’s advisers are considering whether the old shareholders should be offered a priority allocation in the float.

Centaur Mining and Exploration shareholders are still waiting for their declaration.

The Australian Securities and Investments Commission has launched an investigation into possible insolvent trading offences by the company.

HIH (October 2001) and One. Tel (May 2002) have each received their liquidator’s declaration. Shareholders in these companies can claim the losses in their tax returns.

The claimable amount is the difference between the purchase price of the shares (whatever was paid for them including charges) and the sale price, which is nil.

Capital losses can be offset against any capital gains to reduce the investor’s total capital gains tax (CGT) payable, provided the shares were acquired after CGT started in September 1985.

Mr McLean’s website tracks about 500 companies that were delisted in the 1990s.

Most of these are not in liquidation. They could be in receivership or under administration, or reincarnated through a backdoor listing.

Kobe capital for example, disappeared in 1990, but after three changes of name re-appeared last year as Brisbane Broncos Limited.

Do a check on that company in which you used to hold shares and you may be pleasantly surprised, says Mr McLean.