AU Tax Loss Harvesting Calculator 2025-26

How Tax Loss Harvesting Works Under ATO Rules

Tax loss harvesting is a legal strategy where Australian investors sell underperforming investments before 30 June to crystallise capital losses. These losses are then applied against capital gains realised in the same financial year, reducing the net capital gain added to taxable income. Under the Income Tax Assessment Act 1997, capital losses must be applied against capital gains before any other deductions, and before the 50% CGT discount is applied to eligible long-term gains.

Unlike the United States, Australia has no statutory wash sale rule with a fixed holding period. There is no automatic 30-day repurchase rule that disallows a loss. However, the ATO's general anti-avoidance provisions in Part IVA of the Income Tax Assessment Act 1936 can apply to arrangements that are entered into with the dominant purpose of obtaining a tax benefit where there is no genuine commercial rationale. Genuine portfolio rebalancing — selling an underperforming stock and reinvesting in a different sector or asset class — is not the same as selling and immediately buying back the identical asset purely for the tax benefit.

The 50% CGT Discount and How Losses Interact With It

One important ATO rule that makes Australian tax loss harvesting less straightforward than the US equivalent is the mandatory order of operations. You must apply capital losses to your gross gain before applying the 50% CGT discount — not after. This means a $10,000 capital loss offsets $10,000 of gross gain, but that $10,000 of gain would have been discounted to only $5,000 anyway if the asset was held for 12 or more months. You are therefore using $10,000 worth of losses to remove a $5,000 taxable gain.

This creates a subtle trade-off: if you have both short-term gains (no discount) and long-term gains (50% discount eligible), harvesting losses to offset the short-term gains first is more tax-efficient. A $10,000 loss against a short-term gain saves more tax dollar-for-dollar than the same loss against a long-term gain that would have been halved by the discount. This calculator models this interaction so you can see the real net saving after accounting for discount eligibility.

Unused capital losses cannot be deducted against wages, rental income, or business income in Australia — they can only be applied against capital gains. Losses carry forward indefinitely, but the sooner you can offset them against gains, the sooner you benefit. Timing around EOFY is therefore critical: a loss must be crystallised (by trading) before 30 June to count in the current financial year.

EOFY Tax Planning: Timing Your Harvesting Before 30 June

The Australian financial year ends on 30 June. For shares listed on the ASX, the CGT event occurs on the trade date — the day you place the sell order — not the T+2 settlement date. This means if you plan to harvest losses before EOFY, you must place your sell orders before the market closes on 30 June, even though settlement will occur in early July. For unlisted assets such as managed funds, the CGT event may be based on when the redemption is processed, so check the specific rules for your investment vehicle.

A common EOFY strategy is to review your portfolio in May or early June, identify assets trading at a loss, and decide whether to hold, sell and reinvest in a different asset, or simply exit the position. Investors who hold shares in underperforming sectors or companies that no longer fit their strategy have the opportunity to realise a genuine economic exit while also capturing the tax benefit. Buying back the same or identical asset immediately after selling purely for the paper loss — without any genuine intent to exit — is the pattern the ATO's Part IVA anti-avoidance rules are designed to catch.

Part IVA Anti-Avoidance: What the ATO Watches For

Part IVA of the Income Tax Assessment Act 1936 gives the ATO broad powers to cancel tax benefits from schemes entered into with the dominant purpose of obtaining a tax advantage. The ATO can look at factors including: whether the arrangement produces a genuine change in economic exposure, whether similar taxpayers would enter the same arrangement commercially, whether the timing is driven entirely by tax, and whether the arrangement lacks substance beyond the tax benefit.

A taxpayer who sells ASX shares on 28 June, claims a capital loss, and buys back identical shares on 2 July with no change to their portfolio other than the realised loss is at risk of a Part IVA audit. By contrast, an investor who sells underperforming mining stocks after reviewing their portfolio strategy and rotates the capital into infrastructure or healthcare is making a genuine commercial decision with an incidental tax benefit. The substance of the transaction matters more than the timing. Always ensure your harvesting decisions reflect genuine portfolio strategy, and consider seeking advice from a registered tax agent if you are harvesting significant losses close to EOFY.