ATO warning on asset wash sales

The ATO warned taxpayers not to engage in “asset wash sales” to artificially increase their losses and reduce gains for tax purposes. The ATO said its sophisticated data analytics can identify wash sales through access to data from share registries and crypto asset exchanges. When the ATO identifies this behaviour, the capital loss is rejected.

Assistant Commissioner Tim Loh 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 “after a short period of time” for the deliberate purpose of realising a capital gains loss and obtaining a tax benefit. Ruling TR 2008/1 contains the ATO’s views on wash sales and the potential application of Pt IVA.