Small mercies

Annette Sampson

The Sydney Morning Herald

18 September 2002

The strategy: to claim a capital loss on my disastrous share investments.

You mean my HIH and One.Tel shares? And your Pasminco, Harris Scarfe, LibertyOne, Centaur Mining & Exploration and other dogs. When a company goes belly-up, one of the few compensations for shareholders is being able to claim a capital loss for the cost of their investment.  But that isn't as simple as it sounds.

Tony McLean, the principal of the Web site www.delisted.com.au and former executive director of the Australian Shareholders' Association, says one of the biggest problems for shareholders is keeping track of what happens to companies once they are delisted from the Australian Stock Exchange and their shares are no longer traded. Not all delisted companies make the front page like One.Tel and HIH. That's why McLean has set up the site: to track these companies and their current status.

But why do I need to keep track of them? Can't I just write off the shares once I can no longer trade them? The Tax Office has fairly strict rules on when you can claim a tax loss and, unfortunately, delisting isn't enough. McLean says the general rule is that you can only claim a loss in four circumstances: If the shares are sold on the market before the company is delisted. In some circumstances, where the shares are sold after delisting. If the company is deregistered. If the company is in liquidation and the liquidator has issued a declaration saying shareholders won't get a return on their money.

In most cases, shareholders have to wait for the liquidator's declaration before they can claim a loss and this can be frustrating as it often takes years before a declaration is issued and shareholders tend not to be informed when it is.

Can I claim a loss on my HIH and One.Tel shares? In both cases, liquidators' declarations were issued in the last financial year which means losses can be claimed in this year's tax return. McLean says this was faster than usual partly because these were high-profile collapses and involved a large number of shareholders and partly because it soon became apparent shareholders would not get their money back.

Pasminco shareholders were given a declaration this month while LibertyOne's liquidators issued a declaration last September. But shareholders in Harris Scarfe, Centaur Mining & Exploration and Stanilite Pacific are still waiting for declarations. McLean says Stanilite shareholders have been waiting about six years.

In some cases, shareholders don't realise they can claim a loss on shares they gave up hope on some time ago, so they miss out on the benefit.

What can I do if the company hasn't been deregistered and there is no liquidator's declaration? If there is a reasonable amount of money involved it may be worth getting professional advice. There may be a way to sell the shares to realise a loss and in some cases the Tax Office will allow isolated transactions to be claimed as a tax-deductible revenue loss rather than as a capital loss.

You can also lobby the liquidators but be aware they cannot issue a declaration if they believe there is some chance of a capital return to shareholders.

If my shares have been delisted, does that automatically mean the company is in liquidation? Not by a long shot. The company may have breached the Australian Stock Exchange's listing rules, it may have morphed into something else, or it may be in receivership or administration.

McLean says that's why his Web site tracks about 500 companies that were delisted in the 1990s and not just the 50 or so that have liquidators' declarations.

In some cases, he says, shareholders may be pleasantly surprised. Some companies have been delisted but relisted under a new name, which means their history on the ASX Web site is wiped out. He cites the example of Kobe Capital, which disappeared in 1990 but after four reincarnations now trades as Brisbane Broncos Ltd.