A snippet from Motley FoolThe Australian Taxation Office has...

A snippet from Motley Fool

The Australian Taxation Office has warned it will be watching a particular practice involving investors who dabble in ASX shares and cryptocurrencies.

In June, just before the financial year ends, many investors sell off badly performing stocks or crypto to reduce their capital gains tax liability.This is called tax-loss selling which, in itself, is legitimate.But the tax office will be watching out to see if those same investors re-buy those dumped ASX shares straight after the new financial year starts.Because then innocent tax-loss selling becomes a ‘wash sale’.“

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 stated.“The taxpayer disposes of and reacquires the asset for the deliberate purpose of realising a capital gains loss and obtaining an unfair tax benefit.”