Crypto investments don’t always go as planned. Prices drop, portfolios dip, and sometimes you’re left holding assets worth much less than what you paid. But if you’re an Australian investor, there’s a silver lining — crypto tax loss harvesting. This strategy lets you turn underperforming assets into tax advantages by offsetting capital gains with losses.
In 2025, with the ATO intensifying its focus on crypto reporting, knowing how to harvest losses properly can save you more than just money — it can prevent costly mistakes. In this guide, we’ll walk you through how tax loss harvesting works in Australia, the rules you must follow, key deadlines, and how to avoid penalties.
What Is Tax Loss Harvesting in Crypto?
Tax loss harvesting, also called tax loss selling, refers to the practice of selling a crypto asset that has decreased in value to intentionally realise a capital loss. This realised loss can then be used to offset any realised capital gains you’ve made during the same financial year.
If you have no gains that year, the loss can be carried forward to reduce future gains. It’s a legal, ATO-compliant strategy used by many savvy investors to reduce their taxable income under CGT rules.
Read More: Ultimate Guide on Crypto Taxes in Australia
How It Works for Crypto Assets?
Tax loss harvesting works particularly well for crypto because of its volatility. Say you bought a token at a high price and it now trades lower — by selling that token, you lock in a capital loss. If you’ve also sold another crypto at a profit, that loss can cancel out the gain, reducing or eliminating your CGT bill.
The process only works for realised losses, so just holding a declining asset won’t help. You must dispose of the asset through selling, swapping, or using it in a transaction to trigger the CGT event.
Why Does It Matters For Australian Crypto Investors?
In Australia, the ATO taxes capital gains at the same rate as your income, depending on your bracket. This makes tax loss harvesting extremely valuable. Here’s why tax loss harvesting matters for crypto investors in Australia:
- Offset Gains Immediately or Carry Forward: If you have gains in the same financial year, losses must be used immediately. If not, they can be carried forward indefinitely — a long-term planning benefit.
- Strategic End-of-Year Portfolio Cleanup: Reviewing and selling underperforming assets before June 30 lets you reduce taxable gains and improve your portfolio performance at the same time.
- Helps With High-Volume Crypto Traders: For active investors with frequent trades, offsetting gains with losses is essential to manage fluctuating profits and avoid large surprise tax bills.
- Supports Better Tax Positioning: By aligning disposals with low-income years or high-loss periods, tax loss harvesting allows for smarter, legally optimized tax outcomes.
Rules for Claiming Capital Losses in Australia
The ATO allows crypto investors to use capital losses to reduce their capital gains tax liability, but specific conditions apply. Understanding these rules is critical to ensure your loss claims are valid, accurately reported, and not disallowed under Australian tax law. This section breaks down when and how you can use losses and which ones are excluded.
When You Can Use Capital Losses?
Capital losses must be applied in the same financial year in which they are incurred, provided you also have capital gains. If you sell one crypto asset at a loss and another at a profit, you must offset the loss against the gain before calculating your net tax liability. This reduces the overall capital gains subject to tax and can lower your tax bill significantly in the current year.
Carrying Losses Forward
If you incur capital losses in a year but have no capital gains to offset them against, those losses don’t go to waste. You can carry them forward to future years and use them when you do have capital gains. The ATO allows you to carry forward net capital losses indefinitely — there’s no expiry date. However, you’re obligated to use these losses as soon as you have eligible capital gains, meaning you cannot defer them once an offset opportunity exists.
Non-Allowable Capital Losses
Not every crypto-related loss qualifies for a capital loss deduction. The ATO excludes losses from certain types of assets, including:
- Personal Use Assets: Items purchased for personal enjoyment (e.g. crypto used in private transactions below AUD 10,000) do not generate deductible losses.
- Exempt CGT Assets: Some assets, such as those owned before 20 September 1985, are CGT-exempt and do not qualify.
- Collectibles Below the Threshold: Losses from collectibles (like NFT art) worth less than AUD 500 cannot be claimed under CGT rules.
These exclusions help prevent misuse of the tax system and ensure that only investment-related losses qualify for offsets.
Read More: Introduction to Crypto Taxes in Australia
How Tax Loss Harvesting Works: A Simple Example!
Understanding tax loss harvesting becomes easier when you see it in action. Let’s say you bought Bitcoin at AUD 20,000 and Ethereum (ETH) at AUD 4,000 earlier in the year. Now, Bitcoin has risen in value to AUD 22,000, while ETH has dropped to AUD 2,000.
You plan to sell your Bitcoin and realize a AUD 2,000 capital gain. Without tax loss harvesting, that gain would be fully taxable under the Capital Gains Tax rules based on your income bracket.
However, if you also sell your ETH at AUD 2,000, you lock in a AUD 2,000 capital loss. Under ATO rules, you can now offset this loss directly against your Bitcoin gain. The result? Your net capital gain becomes zero — and you owe no CGT on these transactions.
This example illustrates how timing your disposals strategically can eliminate your tax liability without making any illegal moves. It’s a legitimate tool to reduce your overall tax burden — but only when done within the rules and before the end of the financial year.
Wash Sale Rules by ATO: What to Avoid?
A wash sale happens when an investor sells a crypto asset at a loss and then repurchases the same (or a substantially similar) asset shortly after. The intent is to trigger a capital loss without really changing the investment position. This strategy creates a “paper loss” and undermines the integrity of genuine tax loss harvesting — which is why the ATO targets it.
ATO’s Approach to Wash Sales
Unlike other countries, the ATO does not define a strict time window (like 30 or 60 days) for identifying wash sales. Instead, it focuses on intent. If your transaction pattern indicates a plan to sell and quickly rebuy for tax reasons, it may be flagged. The ATO examines records, timing, patterns, and even communications to determine if a wash sale occurred.
Penalties for Wash Sales
If the ATO concludes that your loss was artificial or part of a wash sale, that loss will be disallowed. You may also face additional consequences, such as interest on underpaid tax and potential penalties. Repeated or large wash sale behavior can also increase your risk of audit. Avoiding this requires careful timing and recordkeeping of your transactions.
Read More: How Are Crypto Airdrops Taxed in Australia
Key Deadlines for Tax Loss Harvesting in 2025
Timing is everything when it comes to crypto tax loss harvesting in Australia. To ensure your realised losses count toward reducing your tax liability for the 2024–25 financial year, you must finalise all disposals before the end of the tax year. Missing these deadlines could mean waiting another year to benefit from your capital losses.
Here are the important dates to remember:
- June 30, 2025 – Last day to sell crypto assets at a loss to include them in your 2024–25 tax return.
- October 31, 2025 – Deadline to file your individual tax return if lodging on your own.
- May 15, 2026 – Extended deadline for tax agents or accountants to file your return if you’re registered with them before October 31.
Planning ahead and reviewing your portfolio before June ensures you have enough time to take action — and benefit from legitimate tax reductions without rushing or risking compliance.
Benefits and Risks of Crypto Tax Loss Harvesting
While tax loss harvesting can offer significant advantages for Australian crypto investors, it’s not without its trade-offs. Below, we break down the key benefits and risks you should consider before using this strategy.
Benefits of Tax Loss Harvesting
Here’s the benefits of tax loss harvesting in Australia:
- Reduces Taxable Capital Gains: Harvesting assets at a loss allows you to offset gains from other crypto disposals, directly reducing the amount of Capital Gains Tax (CGT) you owe.
- Carries Forward Future Savings: If you don’t have any capital gains in the current year, the losses can be carried forward indefinitely and used to reduce tax in future years.
- Improves Portfolio Performance: Harvesting losses encourages a review of poor-performing assets, helping you exit weak positions and reallocate to stronger investments.
- Legal and ATO-Approved: When done correctly and without triggering wash sale rules, tax loss harvesting is a completely legal and recognised strategy under Australian tax law.
- Maximises Low-Income Years: Harvesting in years when you have a lower income can help you minimise the CGT rate on any residual gains, combining well with loss harvesting.
Risks of Tax Loss Harvesting
Here’s the risks of tax loss harvesting in Australia:
- Possibility of Missing Future Gains: Harvesting at a loss locks in a negative return. If the asset rebounds, you could miss out on potential profits from a market recovery.
- Wash Sale Disqualification: If you repurchase the same or similar asset too soon, the ATO may disallow your loss as part of a wash sale, invalidating the tax benefit.
- Emotional Decision-Making: Investors may act hastily to realise tax losses without a full strategy, leading to poor portfolio outcomes driven by tax-saving goals rather than fundamentals.
- Recordkeeping Burden: Accurate transaction history, wallet tracking, and timestamps are required to validate your loss claims. Poor documentation can lead to complications during tax filing.
How KoinX Can Help With Crypto Tax Loss Harvesting in Australia?
Tax loss harvesting can be effective only if you have the right tools to track losses in real time and generate accurate reports. Manual calculations are error-prone and time-consuming. That’s where KoinX steps in — offering powerful features to simplify your crypto tax loss harvesting strategy while staying fully compliant with ATO rules.
Smart Portfolio Insights
KoinX gives you a clear view of your crypto holdings with real-time performance updates. It automatically calculates both realised and unrealised losses, helping you identify the right assets to harvest without guesswork.
Automatic Capital Gains/Loss Tracking
Every time you sell, swap, or dispose of crypto, KoinX records the transaction and updates your gain or loss totals instantly. It applies Australian CGT rules correctly, so you always know where your tax position stands before year-end.
ATO-Compliant Capital Loss Reports
KoinX generates downloadable tax reports specifically structured for ATO requirements. These include detailed breakdowns of your capital losses, disposal events, and cost bases — everything needed for your tax return or to provide to your accountant.
Transaction Classification Engine
KoinX auto-categorises your crypto activities into taxable and non-taxable events. This is especially useful when you’re claiming losses, as it ensures that only eligible disposals are included in your report while excluding non-qualifying assets like personal use crypto.
Make tax loss harvesting easier and error-free — start using KoinX today and simplify your 2025 crypto tax filing in Australia.
Conclusion
Crypto tax loss harvesting is a practical, legal strategy that allows Australian investors to reduce their capital gains tax liability by selling underperforming assets. By understanding ATO rules, avoiding wash sale pitfalls, and tracking key deadlines, you can take advantage of market dips to improve your overall tax position.
Instead of struggling with spreadsheets and deadlines, use KoinX to automate the process. From tracking losses in real time to generating ATO-ready tax reports, it takes the complexity out of crypto tax filing. Sign up today and make crypto tax loss harvesting simpler, faster, and more accurate with KoinX.
Frequently Asked Questions
Can I Harvest Losses From NFTs And Still Claim CGT Offsets?
Yes, you can harvest losses from NFT disposals just like cryptocurrencies, provided the NFTs are not classified as personal use or low-value collectibles. If you sell an NFT at a lower price than you purchased it for, the resulting capital loss can be used to offset gains from other crypto or NFT sales within the same financial year or future years.
Can I Use Tax Loss Harvesting if I Only Made Losses This Year?
Absolutely. If you didn’t make any capital gains in the current financial year, you can still realise and report capital losses. These losses can be carried forward and used to offset capital gains in future years. The ATO does not place an expiry on carried-forward capital losses as long as you keep valid records.
Do I Need to Harvest Losses Before a Certain Time in the Year?
Yes, you must sell the crypto asset and realise the loss before 30 June for it to apply to that financial year’s tax return. If the disposal happens after June 30, the loss will only apply to the following year. Timing matters when planning offsets, especially for capital gains incurred earlier in the same tax year.
What Crypto Transactions Cannot Be Used for Tax Loss Harvesting?
Transactions involving personal use assets or crypto worth less than AUD 10,000 used for everyday purchases are not eligible for capital loss deductions. Likewise, assets that are CGT-exempt or losses from low-value collectibles such as certain NFTs may not qualify. Always check if the asset type is recognised under ATO’s CGT rules.
