Available-for-Sale (AFS) securities are back in the spotlight for Australian investors in 2025, thanks to updated accounting standards and a renewed focus on portfolio flexibility. Whether you’re an individual investor or managing an SMSF, understanding AFS securities can help you make smarter, more strategic decisions in a volatile market.
What Are Available-for-Sale Securities?
AFS securities are financial assets—such as shares, bonds, or hybrid instruments—that are not classified as either ‘held for trading’ or ‘held to maturity’. Instead, they’re designated as available for sale, giving investors the option to sell them as market opportunities arise. Under the previous AASB 139 framework, gains and losses on AFS securities were recognised in ‘other comprehensive income’ rather than the profit and loss statement, only impacting profit when sold.
From 2025, Australian entities are fully aligned with IFRS 9, which replaces the AFS category with ‘fair value through other comprehensive income’ (FVOCI) for certain debt instruments. This means:
- Equity investments are generally measured at fair value through profit or loss, unless an irrevocable election for FVOCI is made at initial recognition.
- Debt securities can be classified as FVOCI if the business model involves both collecting contractual cash flows and selling the assets.
This shift impacts reporting, tax planning, and investment strategy.
2025 Policy Updates and Tax Implications
With the ATO and ASIC tightening compliance around financial reporting, transparency for AFS-type assets is more important than ever. Key updates for 2025 include:
- Fair Value Reporting: All marketable securities must be valued at fair market value at each reporting date. Unrealised gains and losses on FVOCI assets are tracked in reserves, not immediately in profit and loss.
- Capital Gains Tax (CGT): For individuals and SMSFs, gains on AFS securities are only realised for tax purposes when the asset is sold. However, regular revaluation means investors need to keep detailed records of cost bases and fair value adjustments.
- Disclosure Requirements: ASIC’s 2025 guidance requires clear disclosure of FVOCI reserves, transfer of realised gains to retained earnings upon disposal, and a reconciliation of movements in each reporting period.
For example, if your SMSF holds a portfolio of ASX-listed bonds classified as FVOCI, you’ll see unrealised gains in your fund’s equity section. But it’s only when you sell those bonds that capital gains or losses are crystallised for CGT purposes.
Strategies for Using AFS Securities in Your Portfolio
AFS securities—now FVOCI assets—offer a sweet spot between liquidity and long-term growth. Here’s how Australian investors are leveraging them in 2025:
- Diversification: By holding a mix of equities, bonds, and hybrids as FVOCI, you can respond to market shifts without triggering immediate tax events.
- Income Planning: Many investors use AFS securities to time the sale of assets for tax efficiency, particularly around financial year-end.
- Risk Management: Because you’re not locked in for the long term, you can reduce exposure to underperforming assets before losses are realised in the profit and loss statement.
For instance, an investor might hold green bonds issued by an Australian infrastructure project as FVOCI. If interest rates rise, they can sell and rotate into higher-yielding assets, with any gains or losses handled through equity until the sale.
Practical Considerations and Future Trends
With the line between trading and long-term investment blurring, record-keeping and compliance are essential. In 2025, digital portfolio platforms are making it easier to track fair value adjustments and tax lots, while ASIC and the ATO are scrutinising mismatches in reporting.
Looking ahead, expect further integration of ESG metrics into available-for-sale portfolios, as more investors seek to align returns with sustainability goals. And with Australia’s capital markets growing more sophisticated, the flexibility of AFS/FVOCI securities will remain a key tool for both retail and institutional investors.
