The Federal Court has in Greig v FCT held that a taxpayer was not entitled to a deduction under S.8-1 of the ITAA 1997 for share losses and legal fees.


On the advice of his financial advisers, the taxpayer (Mr Greig) spent many millions of dollars on share purchases during the period between 2008 and 2014.

In those cases, any gains or losses from share trading were returned as either capital gains or capital losses in his tax return.

These included the sale of one million shares in a company (i.e., ‘Nexus’), which was treated as a capital loss on his 2011 tax return.

From March 2012 to May 2014, further purchases of Nexus shares were made.

Unfortunately, Nexus was placed into administration, with Mr Greig’s shares ultimately transferred for nil consideration during the 2015 income year.

This transfer resulted in an $11.85 million loss for Mr Greig.

Further, he had spent $507,000 on legal fees in unsuccessfully opposing the proceedings to transfer the shares.

After receiving tax advice, Mr Greig took the position the Nexus shares were held on revenue account such that a $12.35 million loss (i.e., loss on the share transfer plus the cost of the legal fees) was deductible in the 2015 income year.

Mr Greig argued the loss was deductible either because:

  • the “profit target strategy” employed constituted a “business operation or commercial transaction”; or
  • he was in the business of dealing in the shares of Nexus for a profit.


The Federal Court found that although Mr Greig intended to obtain a profit or gain from acquiring and disposing of the Nexus shares, they were not being acquired as part of a business operation or commercial transaction.

The Court observed that purchasers of listed shares often make the decision to acquire such shares with the view to profit from dividends and/or the increase in share price, however, this is not akin to a “business operation or commercial transaction”.

The Court then turned to the question as to whether a business was being carried on, and concluded it was not, primarily on the basis that:

  • Mr Greig did not provide the Court with any written business plans, methodologies or similar documents as records of his business of dealing in Nexus shares.
  • there was no evidence he treated the shares as trading stock; and
  • the records provided were those prepared by his advisers, maintained in their businesses, and did not relevantly distinguish the Nexus shares from the rest of Mr Greig’s portfolio.

Therefore you need to be very careful when declaring share losses on revenue account rather than capital account.

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If you have a query regarding share losses, or want further information, please contact our tax accountants on (02) 9223 9166 to discuss. Alternatively, you can submit an online enquiry form.