ATO clamps down on ‘wash sales’

australian taxation office ATO taxation financial advisers australian securities exchange income tax director

29 May 2008
| By George Liondis |

Chartered accountants GMK Centric has warned financial advisers to take note of the latest round of ‘wash sale’ decisions to be issued by the Australian Taxation Office (ATO) coinciding with year-end tax planning.

GMK Centric taxation director Chris Wookey said the ATO intends to apply the general anti-avoidance provisions of Part IVA of the Income Tax Assessment Act 1936 to a number of arrangements known collectively as ‘wash sales’ due to the perception of them having little commercial rationale.

According to a January 2008 tax ruling and April 2008 taxpayer alert, the ATO believes that if a taxpayer sells a parcel of shares on the Australian Securities Exchange only to buy them back within 24 hours, such an action was only explicable by a dominant purpose of obtaining a tax benefit and was potentially changeable using Part IVA.

“The ATO is not seeking to attack outright sales and genuine disposal of assets at market value,” Wookey said.

“Rather, it is targeting situations where economic ownership is effectively retained.”

Wookey said advisers who have advocated such wash sales could be prosecuted under the promoter penalty regime, with fines of up to $550,000 for individuals and $2.75 million for companies.

“Clients and advisers will need to take care not to undertake what may have been a traditional tax planning action when reviewing their 2008 tax affairs in the lead up to June 30.”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

1 month 1 week ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

1 month 1 week ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

3 months 1 week ago

Entireti has unveiled the new name for the AMP financial advice businesses that it acquired last year....

6 days 4 hours ago

Lonsec has appointed a new chief executive for its research and ratings division as Mike Wright takes up a new role in light of the acquisition of Evidentia Group by Lons...

1 month ago

The Financial Services and Credit Panel has cancelled the registration of an NSW adviser for two years as it felt he displayed a ‘level of incompetence’ in providing advi...

1 month ago

TOP PERFORMING FUNDS