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If you do this the ATO is watching: ‘Count your losses’

Australian ATO tax return forms and a man holding Aussie $50 notes
The ATO is keeping an eye on Aussies who try to artificially raise their losses. (Source: Getty)

The Australian Taxation Office (ATO) is warning taxpayers to not engage in ‘asset wash sales’ to artificially increase their losses and reduce gains or expected gains.

Wash sales are a form of tax avoidance the ATO is focused on this tax time.

A wash sale is typically when assets - such as crypto and shares - are disposed of before the end of the financial year but, shortly thereafter, the same or substantially similar assets are then reacquired.


This is done to create a loss to offset against a gain already derived, or expected to be derived, in a tax return.

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 ATO 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, resulting in an even bigger loss to the taxpayer.

ATO assistant commissioner Tim Loh has urged taxpayers not to engage in this behaviour.

“Don’t hang yourself out to dry by engaging in a wash sale,” Loh said.

“We want you to count your losses, not have them removed by the ATO.”

The ATO has warned that taxpayers who engage in wash sales are at risk of facing swift compliance action, and additional tax, interest and penalties may apply.

Aussies have been urged to ignore any advice encouraging a wash sale of any asset.

“If something seems too good to be true, it probably is,” the ATO said.

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