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ATO: don’t engage in asset wash sales

The Australian Taxation Office (ATO) is warning taxpayers, don’t engage in asset wash sales to falsely increase their losses and diminish gains or expected gains from investments. Wash sales are a form of tax avoidance, which is prohibited.

Wash sales usually involve the disposal of assets such as shares and crypto just before the end of the financial year. After a short period of time has passed, the taxpayer reacquires the same or substantially similar assets in similar quantity. This is a wash sale and is done to create an artificial loss to offset against a gain derived in that financial year, or expected to be derived.

A wash sale is different from normal buying and selling of assets like shares & crypto, because it is undertaken for the purpose of generating a tax benefit for the current financial year. The taxpayer sells off and buys the asset in the next financial year for the deliberate purpose of realizing a capital gains loss and obtaining an unfair tax benefit.

The ATO is focusing on wash sales activity being perpetrated this financial year and warns any taxpayers that may be involved in this activity will face compliance, tax and interest penalties. The ATO advices taxpayers to check with registered tax professional and not rely on advice received through social media or advertisements.

For further information, please contact us & we’ll be happy to answer any question you may have on the topic.

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