Question of the Week

Question of the week: Can I sell shares before EOFY to get a capital loss, then buy them back?

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Q. I have several shares with losses. What are the rules if I was to sell them before financial year to get a capital loss, but buy them back at some stage? Is it any different if I was to firstly buy some more and then sell half of them for example? What constitutes a share wash?

A. Thanks for the question.

If you are in any doubt, you should access the assistance of a qualified accountant or tax professional.

There aren’t any specific rules per se, except that any transaction or series of transactions that could involve a “scheme” could potentially run fowl of the general anti-avoidance provisions in Part IVA. The ATO has provided its guidance in Taxation Ruling TR 2008/01, which deals with “wash sales” and is available here.

Generally, it can’t be a scheme for the avoidance of tax, there must be separate sale and purchase transactions, and there must be a sufficient time interval such that there is a material financial risk.  In an example the ATO considers in the guidance note, it doesn’t think that 24 hours is sufficient.

I hope this helps.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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