Written

For

The

Australian

-

How

to

steer

clear

of

the

ATO

if

selling

stocks

for

capital

losses

Want to know the fastest way to turn a smart tax move into an expensive mistake? Sell your loser shares in June and buy them straight back in July.

With the financial year winding down and the ASX defying the usual "sell in May" wisdom by climbing since April, plenty of investors are sitting on realised capital gains they'd rather not hand a chunk of to the ATO. If you sold CBA at recent highs or offloaded an investment property for a decent profit, you could be facing capital gains tax of up to 47 per cent if held under 12 months, or 23.5 per cent if held longer.

The classic strategy is to sell underperforming investments to crystallise capital losses and offset those gains. It's legitimate — but only if you play it properly. What trips people up is the "wash sale."

Assistant commissioner Tim Loh has been blunt: sell a loss-making asset and buy it back shortly after, and the ATO will likely disallow the loss under Part IVA anti-avoidance rules. And don't think you'll fly under the radar — the ATO now pulls data directly from share registries and crypto exchanges. Selling 100 BHP shares in June and repurchasing 100 BHP shares in July is a red flag waving straight at them.

Here's where it gets interesting. Selling BHP and then buying a mix of BHP and a resources ETF like VanEck Australian Resources? According to the accountants I spoke with, that's unlikely to be a wash sale because your economic exposure has genuinely changed. Same goes for switching between ETFs tracking the same index — say, moving from one ASX 300 fund to another with lower fees or better tax treatment.

The lesson is simple: intention matters. If your only reason for selling is to bank the loss and rebuild the same position, you're asking for trouble. Get advice before you press the sell button.