In 2025, the wash-sale rule is front and centre for Australian investors as the ATO tightens its scrutiny on tax-loss selling. Here’s what you need to know to stay compliant, optimise your tax outcomes, and avoid costly mistakes.
Understanding the Wash-Sale Rule in Australia
Unlike the US, where the wash-sale rule is set in stone, Australia’s approach relies on anti-avoidance provisions. In simple terms, a ‘wash sale’ occurs when you sell an asset (like shares or crypto) to realise a capital loss for tax purposes, then buy the same or substantially identical asset back soon after. The ATO views this as a tax dodge, and in 2025, they’re more vigilant than ever.
- Assets affected: Shares, ETFs, managed funds, cryptocurrencies, and even some collectibles.
- Timing: The wash-sale rule is triggered not by a fixed period but by the intent and pattern of repurchase — usually if you buy back within days or weeks.
- Penalty risk: If the ATO deems your transaction a wash sale, the capital loss can be denied, and penalties may apply.
ATO Crackdown in 2025: What’s Changed?
The 2025 financial year has seen a surge in ATO data-matching and AI-driven audits. With market volatility and tax-loss harvesting strategies on the rise, the ATO has updated its guidance and enforcement:
- Data-matching: The ATO now cross-references broker, crypto exchange, and fund manager data in near real-time.
- Flagged behaviour: Rapid repurchase of the same asset, especially around the June 30 tax deadline, is likely to be investigated.
- Public guidance: In April 2025, the ATO released new examples of what constitutes a wash sale, including scenarios involving ETFs and crypto tokens with near-identical exposure.
One real-world example: an investor sells $20,000 of XYZ shares for a loss in June, then repurchases them two weeks later. If the only reason for the sale was to trigger the loss, the ATO may disallow the deduction and issue a penalty.
How to Stay on the Right Side of the Law
Smart investors know that legitimate tax-loss selling is still allowed — but intent and execution are everything. To avoid trouble in 2025:
- Wait it out: If you sell an asset at a loss, avoid buying back the same or a substantially identical asset for at least 30 days. While there’s no hard rule, this shows you’re not simply gaming the system.
- Switch exposure: Consider shifting to a different asset class or a fund with a different investment mandate to avoid ‘substantially identical’ risks.
- Document your reasons: Keep records of your investment rationale—such as rebalancing, liquidity needs, or changed market outlook—to demonstrate genuine intent.
- Don’t ignore crypto: The ATO’s 2025 focus includes digital assets. Selling and rapidly rebuying the same token is squarely in the wash-sale firing line.
Wash-Sale Rule: The Bottom Line for Investors
The wash-sale rule is no longer just a footnote in tax law — it’s a live issue for anyone selling assets at a loss in 2025. With the ATO’s crackdown, investors need to be strategic, careful, and honest in their tax-loss harvesting. Ignoring the rules could turn a small tax benefit into a major headache.
