Many years ago, before I became self-employed, I worked with a client who unfortunately became the victim of an investment scam.

They were a lovely couple — let’s call them Tommy and Gina. They operated their own self-managed superannuation fund which owned investment property and held substantial cash reserves, most of which sat in low-interest deposit accounts.

My former employer had recommended that they diversify part of their portfolio into shares and listed investments. Like many investors at the time, they had little experience with the share market and did not know where to begin.

One day, Tommy received an unsolicited phone call from someone claiming to be a stockbroker who could assist with share investments. Naturally cautious, Tommy asked Gina to investigate further before proceeding. The business appeared legitimate. They had a professional website, proper email addresses linked to a genuine internet domain rather than free email services, and polished correspondence with professional branding and email signatures.

Tommy initially invested approximately $10,000. All documentation was provided and appeared entirely legitimate. In fact, the first shares purchased were genuine holdings. Over time, the broker maintained regular contact, continued providing investment opportunities, and gradually built Tommy and Gina’s confidence.

Over the following months, they invested a further $70,000 through the broker. It is important to remember this occurred almost 30 years ago, long before the modern safeguards and online verification systems investors rely on today.

Eventually, Tommy considered selling some of the shares and attempted to contact the broker. The phone number had been disconnected. The website had disappeared. The broker could no longer be located.

Sadly, Tommy and Gina had been scammed.

The investments had been made through their SMSF and they were only a few years away from retirement. The financial loss had a significant impact on their retirement savings.



What I remember most clearly, however, was the debate I had with my former employer regarding the taxation treatment of the loss. My view was that the money had effectively been stolen and should therefore have been fully deductible as a loss. My employer took the more conservative position that the amounts should instead be treated as a capital loss.