Tax office alert on ‘wash sale’ arrangements

Tax Commissioner Michael D’Ascenzo has issued a ‘taxpayer alert’ that warns people to be cautious about ‘wash sale’ arrangements that aim to reduce capital gains or claim deductions.

The Australian Taxation Office (ATO) has issued a statement defining wash sale arrangements as the “disposal of an asset, generally shares, with the intention to generate a capital loss”.

The same or substantially the same asset is then later acquired, the ATO statement said.

“In certain circumstances we may determine that wash sale arrangements are schemes to reduce income tax,” D’Ascenzo said.

“People who have already claimed deductions for any losses they incur under these arrangements should consider telling us so that we can help them sort out their situation,” he said.

He added that if individuals approach the tax office before they are contacted for an audit they might be entitled to reduced penalties.

D’Ascenzo said that the ATO is also targeting people or companies that promote wash sale arrangements.

“Entities marketing such schemes should also be careful as they could contravene the promoter penalty laws,” he said.

The ATO requested that any person with information about people or companies who are promoting wash sale arrangements call the tax sale integrity service on 1800 639 745.

However, the tax office is not concerned with the genuine disposal of an asset at market value, the ATO statement said.

More information on wash sale arrangements is available from the ATO website.