Australia's Tax Commissioner, Michael D’Ascenzo, issued a taxpayer alert
late last week warning people to be cautious about certain ‘wash sale’
arrangements to reduce capital gains or claim deductions.
Wash sale arrangements dispose of an asset, generally shares, with the intention
of generating a capital loss.
Subsequently, the same, or substantially the same, asset is then acquired again.
The Tax Office is not concerned with the genuine disposal of an asset at market
value, the Tax Commissioner explained, going on to add that:
“In certain circumstances we may determine that wash sale arrangements
are schemes to reduce income tax.”
"I want to remind anyone who may be considering using wash sale arrangements
to reduce their next tax bill that significant penalties can apply."
D'Ascenzo continued:
“Anyone who is uncertain about their deduction entitlements should seek
independent tax advice or request a private ruling from us."
"People who have already claimed deductions for any losses they incur
under these arrangements should consider telling us so we can help them sort
out their situation."
“If people come to us before we contact them for an audit, they may be
entitled to reduced penalties."
“Entities marketing such schemes should also be careful as they could
contravene the promoter penalty laws,” Mr D’Ascenzo concluded.
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