Tax Loss Harvesting in Australia (2025): Offset Capital Gains & Save

Tax loss harvesting is becoming a buzzword among savvy Australian investors in 2025, and for good reason. With new ATO guidance and shifting market conditions, the strategy of realising investment losses to offset capital gains is evolving. If you’ve been wondering how to optimise your portfolio’s tax position this year, here’s what you need to know—and how you can put tax loss harvesting to work.

What is Tax Loss Harvesting?

Tax loss harvesting is the practice of selling investments that have declined in value to realise a capital loss. That loss can then be used to offset capital gains, potentially reducing your annual tax bill. It’s an approach that’s long been popular in the US, but Australians are catching on, especially as the 2024-25 financial year brings new tax dynamics.

• Capital gains tax (CGT) in Australia: When you sell an asset (like shares or property) for more than you paid, you may owe CGT on the profit.
• Offsetting gains with losses: Realised losses can be used to reduce taxable capital gains from other investments.
• Carrying forward losses: If your losses exceed your gains, you can carry the balance forward to future years—there’s no expiry date in Australia.

Example: Suppose you sold shares in Company A for a $10,000 gain, but another investment (Company B) is sitting at a $7,000 loss. By selling Company B, you can offset most of your gain and only pay CGT on $3,000.

2025 Policy Updates and ATO Guidance

This year, the ATO has issued fresh guidance on tax loss harvesting, with a sharper focus on wash sales—where investors sell and then quickly repurchase the same or substantially similar assets to lock in losses without truly changing their investment exposure. The ATO’s 2025 crackdown means:

• Wash sales are under scrutiny: If you sell and repurchase the same asset (or even similar ETFs or managed funds) within a short period, the ATO may deny your loss.
• Record keeping is critical: Investors must document the commercial rationale for each sale, proving that it wasn’t simply a tax-motivated transaction.
• Crypto assets included: The new rules apply to shares, ETFs, managed funds, and now explicitly to cryptocurrencies, which saw a big rise in loss harvesting after the 2022-23 crypto slump.

Tip: If you’re considering buying back a similar asset, wait at least 45 days, and ensure there’s a genuine change in your investment strategy.

When and How to Use Tax Loss Harvesting

Tax loss harvesting isn’t just a June 30 activity—it’s a year-round discipline. Here’s how Australians are making the most of it in 2025:

• Rebalancing portfolios: As markets shift, harvesting losses can help rebalance your portfolio without an added tax sting.
• Reducing tax on windfalls: Sold a rental property or received a business payout? Losses from investments can offset these capital gains.
• Superannuation strategies: SMSFs can use tax loss harvesting to manage CGT within the fund, especially with the new $3 million super tax threshold in effect from July 2025.

It’s worth noting that not every loss is worth realising. Consider transaction costs, future recovery potential, and your overall investment goals. Also, keep in mind the 50% CGT discount for assets held over 12 months—sometimes it’s better to wait than to crystallise a loss too soon.

Best Practices for 2025

• Review regularly: Don’t wait until tax time. Check your portfolio after market corrections or major economic news.
• Avoid wash sales: Make sure you’re not immediately re-entering the same position.
• Document your reasoning: Note why you sold each asset, and how it fits your overall investment plan.
• Consult updated ATO resources: The ATO’s 2025 investor toolkit has new examples and red-flag scenarios for tax loss harvesting.

Real-world example: In 2024, ASX tech stocks experienced sharp volatility. Many investors sold underperformers to offset gains from earlier property sales, then reinvested in diversified ETFs a month later—avoiding the wash sale trap and setting up for future growth.

Conclusion

Tax loss harvesting is more than a tax trick—it’s a strategic tool for smarter investing in 2025. With the ATO’s increased scrutiny, it pays to play by the rules and keep your records airtight. Done right, this approach can cushion the blow of market downturns and help you keep more of your investment returns.