Asset washing relates to the sale of assets, such as crypto, just before the end of the financial year in order to use the losses to offset income. The asset was then bought again after July 1.

“This is a wash sale and is done to create a loss to offset a gain already derived, or expected to be derived, in certain circumstances, in a tax return,” the ATO said.

“Wash sales are a form of tax avoidance that the ATO is focussed on this tax time.”

The ATO explained that a wash sale was different to the normal buying and selling of assets because it was a strategy used for an artificial purpose of generating a tax benefit.

It said it had sophisticated data analytics which could identify wash sales in share registries and crypto exchanges. When it does identify a wash sale the capital loss is rejected.

ATO assistant commissioner Tim Loh said a small number of tax advisers promoted wash sales or other tax avoidance activities and they could face action from the Tax Practitioners Board.

“Most advisors do the right thing, but a small number encourage this behaviour,” Loh said.

“Promoting a tax avoidance scheme will have serious consequences for the tax advisor and could leave their client with a large tax bill.”

The potential tax bill would be on top of any losses from the sale of the asset.