Part IV A and ‘wash sales’
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The Australian Taxation Office (ATO) has issued a taxation ruling in relation to ‘wash sales’ which is used to describe the sale and purchase of the same or substantially the same asset within a short period of time. The sale and purchase cancel each other out with the result that there is effectively no change in the economic exposure for the owner of the asset.
Often these ‘wash sales’ are effected in order to apply a resulting capital loss or allowable deduction against the capital gain or assessable income already derived or expected to be derived.
The ATO advises in such arrangements that Part IVA may apply – the impact being the Tax Commissioner will make a determination to cancel tax benefits obtained in connection with the ‘wash sale’.
Before considering your capital gains or losses it is important that you discuss your strategy with your Chartered Accountant to ensure that there is a clear understanding between the commercial risk or advantage versus the tax purpose.
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