Wash sale rule in Australia

If you have been reading about tax-loss harvesting, you have probably seen the US "wash sale rule" and wondered whether Australia has something equivalent. The short answer: not exactly. Australia does not have a specific wash sale rule with a fixed time period. Instead, it uses a broader anti-avoidance provision that gives the ATO more discretion, and less predictability for you.

Part IVA: Australia's anti-avoidance provision

Instead of a mechanical 30-day rule, Australia relies on Part IVA of the Income Tax Assessment Act 1936. The ATO can cancel a tax benefit from any "scheme" if the dominant purpose was to obtain that benefit.

"Scheme" is defined extremely broadly. Any arrangement, plan, course of conduct, or series of transactions counts. And the dominant purpose is assessed objectively, based on what a reasonable person would conclude looking at the facts.

The ATO considers factors from section 177D: the manner and timing of the scheme, whether form matches substance, the size of the tax benefit relative to the economic activity, whether your financial position actually changed, and the relationship between parties.

What triggers Part IVA and what does not

Sell and immediately repurchase (likely triggers). Sarah sells 5,000 shares of XYZ Ltd on June 25 at a $10,000 loss and buys them back on June 26 at the same price. Her economic position has not changed at all. A reasonable person would conclude the dominant purpose was the tax benefit.

Sell, reassess, and repurchase weeks later (less likely to trigger). James sells ABC Ltd at a loss after poor earnings. Six weeks later, ABC announces a new contract and James buys back in. There was a genuine gap, market conditions changed, and he had commercial reasons for both decisions.

Sell and switch to a different company (unlikely to trigger). Maria sells Westpac (WBC) at a $5,000 loss and buys Commonwealth Bank (CBA) instead, preferring its outlook. She genuinely changed her investment. The tax loss is a byproduct of a real decision.

Sell at a loss with no repurchase (would not trigger). David sells a stock he has been unhappy with and uses the proceeds to pay down his mortgage. No plan to repurchase. Just a losing investment that ended.

How it compares to the US

The US rule is rigid but predictable. You know exactly where you stand. The Australian approach gives more flexibility (no mandatory waiting period) but less certainty (the ATO can challenge a transaction even after a long gap if the facts point to tax avoidance).

For the US rules in detail, see our US tax-loss harvesting guide.

Harvesting losses safely in Australia

Have a genuine commercial reason. This is the single most important thing. If the tax benefit is a secondary outcome of a real investment decision, you are in a strong position.

Change your investment position. Selling and not repurchasing is cleanest. Selling and buying a different company is low risk. The further the new investment is from the old one, the better.

Keep records of your reasoning. A note in your portfolio tracker, an email to your adviser, or a dated note to yourself documenting why you sold. TrackMyShares lets you add notes to transactions for exactly this purpose.

Do not sell and immediately repurchase the same shares. This is the scenario most likely to attract ATO attention.

Do not assume a specific number of days is safe. Borrowing the US 30-day rule does not work here. The ATO looks at the totality of the circumstances.

Further reading

For more on using losses strategically, see our guide on tax-loss harvesting in Australia. For calculating gains and losses, see how to calculate capital gains on shares in Australia.

Track your capital gains and losses with TrackMyShares

TrackMyShares records every buy and sell, calculates cost base across multiple parcels, and tracks both realized and unrealized gains and losses. When you are considering whether to harvest a loss, you can see your full tax position at a glance.

Accurate records also support your compliance position. If the ATO questions a transaction, you have a complete audit trail: transaction history, timing, and any notes about your reasoning.

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This is general information, not personal tax or financial advice.