Doom buster

Peter Weekes

The Sydney Morning Herald

22 June 2005

As shareholders in the collapsed zinc producer Pasminco can testify, just because a company goes bust doesn't mean it is worthless to existing investors, large and small.

Listed in the table at right are most of the public companies that have failed over the past few years but may yet give a final return to investors if they act before the end of the financial year.

Compiled by deListed.com.au, List A are companies where external administrators have issued a declaration that there will be no return to shareholders.

CPA Australia's senior tax adviser, Gary Addison, says if a liquidator or administrator declares in writing that "there is no likelihood of shareholders receiving further distributions," under the law this means a capital event has occured and consequently a capital loss.

While these can be claimed in the financial year the declaration is issued by an administrator or liquidator, they can be carried forward if investors have no capital gains to claim against, he says.

List B is companies where no declaration have been made, which historically has meant a capital loss cannot be claimed.

The founder of deListed.com.au and former Australian Shareholders Association executive director, Tony McLean, says under a determination issued by the Australian Tax Office, it is possible to claim a loss if it is crystallised through the creation of a trust at "arms length".

To this end deListed buys worthless stock for a nominal amount of $1 for each parcel of shares, enabling investors to crystallise a loss.

Addison says this is known as a "wash sale", where the shares are transferred to someone else at market value. But it is not straightforward and could attract the attention of the Tax Office is not done properly, he says.

McLean says deListed.com.au charges shareholders an administration charge of $76 (or $75 net of $1). This can be done online. The administration charge is also claimable.

McLean also says shareholders who are preparing their tax returns should be aware that the deregistration of a company is also a capital gains tax event, that is, one that is eligible for a loss or gain.

His site has about 700 deregistered companies where a capital loss may be claimed. Go to deListed at http://www.delisted.com.au

DEAD GOOD SHARES

A List - liquidators declarations issued and the capital loss can be claimed

Australian Kaolin; Australia Media; Barron Entertainment; Centaur Mining and Exploration; Cinema Plus; Digicall Group; Dream Haven; Ectec; Eisa; Entrad Corporation; Forestech; Golden West Refining; Harris Scarfe Holdings; Harts Australasia; Ion; HIH Insurance; Kwan Lee Holdings; LibertyOne; National Forge; New Cap Reinsurance; New Tel; Normans Wines; Oddsoft; One.Tel; Pan Pharmaceuticals; Pasminco; Phoenix Technology; Power Pacific; Recruiters Australia; Reynolds Wines; Satellite Group; Seafood Online.com; Smart Communications Group; Sons of Gwalia; Strarch International; Terraplanet; Vanguard Petroleum

B List - declarations have not been made. Sale of worthless shares should be considered

3D Global; Acuity Investment Management; Advanced Energy Systems; Advantage Telecommunications; Alamain Investments; Allstate Explorations; Antaeus Energy; Bligh Ventures; Blue Ensign Tech; Cervantes Seafood; Chieron Holdings; China Construction Holdings; China Convergent Corporation; CMC Power Systems; Consolidated Global Investments; DCS Technologies; Earth Essence International; E-Com Multi; ECSI; Environmental Solutions International; Erawan Company; Farnell and Thomas; Federation Group; Flowcom; Green X Global; Hailian International; Henry Walker Eltin Group; Intercard Wireless; Investment Austasia; IXLA; Jacobsen Entertainment; Kaefer Technologies; Labtam; Laverton Gold; Matrix Oil; Media World Comm; National Textiles; New Bounty; Oriental Crystal; Pacific Intl; Pacific Matrix; Pelsart Resources; Planar Semiconductor Inc; Powerise Technology; Quadtel; Quiktrak Networks; Quoin Int; Q-Vis; RMG Ltd; Ruskin Industries; Safe Effect Technologies; Sam's Seafood; Saxon Investment Group; Selwyn Mines; Southern Pacific Petroleum; Sportech; Stockford; Sunbase China; Tassal; Technical Equities; Telemedia Networks; Telezon; TVSN; Vita Life Sciences; Water Wheel Holdings; Werrie Gold; Western Metals; Wytomic

Source: deListed.