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The office says creating artificial losses through last-minute crypto and share sales will show up in its data analysis.
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If you asset wash you’ll wear it, warns ATO
29 June 2022
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“Asset wash sales” that artificially increase losses or reduce gains are a form of tax avoidance, warns the ATO, and it is making them a compliance focus this year.
It said wash sales typically involved the disposal of assets such as crypto or shares just before the end of the financial year and then reacquiring them – or similar assets – shortly after.
“This is a wash sale and is done to create a loss to offset against a gain already derived, or expected to be derived, in certain circumstances, in a tax return,” the ATO said.
“A wash sale is different from normal buying and selling of assets because it is undertaken for the artificial purpose of generating a tax benefit for the current financial year. The taxpayer disposes of and reacquires the asset for the deliberate purpose of realising a capital gains loss and obtaining an unfair tax benefit.”
The office said it could identify wash sales by applying sophisticated analytics to data from share registries and crypto-asset exchanges.
If an asset wash sale was confirmed then the ATO would reject the capital loss, resulting in an even bigger loss to the taxpayer involved.
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“Don’t hang yourself out to dry by engaging in a wash sale,” Assistant Commissioner Tim Loh said. “We want you to count your losses, not have them removed by the ATO.”
Taxpayers engaging in wash sales could face swift compliance action and additional tax, interest and penalties, the ATO warned.
It urged people to ignore any advice encouraging wash sales from media, social media or advertisements.
“If something seems too good to be true, it probably is,” the ATO said.
The ATO also cautioned tax advisers who might be promoting wash sales or other tax avoidance activities that they could face action from the TPB.
“Most tax advisers do the right thing, but a small number encourage this behaviour. Promoting a tax avoidance scheme will have serious consequences for the tax adviser and could leave their client with a large tax bill,” Mr Loh said.
The ATO said anyone who is suspecting a person, business or tax adviser to be participating in asset wash sales or other tax avoidance to report them.
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