The Australian Taxation Office is warning about the latest tax dodge that will attract its attention: ‘wash sales’.
‘Wash sales’ is the term used to describe the sale of certain assets – examples of these are crypto assets and shares — before a financial year ends so as to get a temporary tax advantage such as a loss on sale. Those assets or assets of a similar nature are then bought again not long afterward.
That tactic is designed to minimise a tax bill but the tax office is warning that attempts to exploit transaction timing to minimise the payment of tax are likely to fail.
A person engaged in a wash sale will be found out through the tax office’s use of its data-matching tools, which can see the trades online via crypto exchanges or share registries.
Assistant commissioner Tim Loh said taxpayers should not try to game the system by selling off and then buying back the same or similar assets.
A further caution from the tax office on wash sales is that taxpayers should be looking at the website of the revenue authority or talking to a properly registered tax agent rather than relying on dubious sources of information on taxation.
A tax professional can only provide advice on taxation arrangements if they are registered with the Tax Practitioners Board, and there are consequences for tax agents who are found to be promoting a scheme that seeks to exploit the timing of a financial year for tax-minimisation purposes.
Tax agents found gaming the system can face a range of sanctions, including the removal of their tax-agent registration.
“Most tax advisors do the right thing, but a small number encourages this behaviour. Promoting a tax-avoidance scheme will have serious consequences for the tax advisor and could leave their client with a large tax bill,” Loh said.
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