Crypto wash sales Australia: are you on a wash cycle?

You may be “on a wash cycle” if you sell crypto at (or near) a loss and then quickly buy back the same coin/token (or an effectively identical exposure) so that, in substance, your economic position has not changed but you have created a tax loss. In Australia, there is no standalone “wash sale rule” labelled specifically for crypto, but the ATO can deny the tax benefit of a wash sale arrangement under the general anti-avoidance provisions (Part IVA) and will also look closely at whether the disposal is genuine and how the CGT rules apply to your facts and intention.

What does “wash cycle” mean for crypto trades in Australia?

A “wash cycle” (wash sale) generally means you dispose of an asset to crystallise a loss and then reacquire the same asset (or an effectively equivalent holding) in a short period, often with little real market risk taken on. The concern is that the loss is engineered rather than arising from a real change in investment position.

From an Australian accounting practice perspective, the ATO analysis typically focuses on:

• Whether there is a real disposal for CGT purposes (a CGT event)
• Whether your pattern of conduct indicates the loss was generated with a tax-driven purpose
• Whether Part IVA applies to cancel the tax benefit

Is wash trading the same as a wash sale?

No. Wash trading is usually a market integrity concept (creating artificial volume by trading with yourself or coordinated accounts). A wash sale is a tax concept about loss harvesting without changing economic exposure.

In practice, crypto clients often do both unintentionally:

• Wash sale risk: Sell BTC at a loss, buy BTC back quickly.
• Wash trading risk: Repeatedly buying/selling between your own wallets/accounts on the same exchange (or related accounts), potentially raising both tax and compliance questions.

Do Australian tax rules have a “30-day wash sale rule” for crypto?

No. Australia does not have a fixed “30-day rule” in the tax law that automatically denies crypto losses if you rebuy within a set period.

Instead, the ATO approach is principles-based:

• CGT rules apply to disposals of crypto held as an investment (CGT asset), with gains/losses calculated under the Income Tax Assessment Act 1997 (ITAA 1997).
• Part IVA (general anti-avoidance) in the Income Tax Assessment Act 1936 (ITAA 1936) can apply where the dominant purpose of an arrangement is to obtain a tax benefit.

ATO guidance expressly discusses wash sales as an integrity concern (even outside crypto) and notes they may attract anti-avoidance scrutiny. For crypto specifically, the ATO’s published view is that crypto is commonly subject to CGT (unless you are carrying on a business of trading), and the ATO expects robust records and substantiation.

When will the ATO consider crypto trades a wash sale arrangement?

The ATO will generally be concerned where the facts show a tax-driven disposal and rapid reacquisition with minimal economic change. Common red flags include:

• Same asset, rapid reacquisition: Selling ETH and buying ETH back soon after.
• Loss-first logic: You selected parcels to sell because they created the biggest capital loss (while intending to remain exposed).
• Pre-arranged buyback: You had a plan (or automated strategy) to rebuy immediately after the sale.
• Minimal market risk: The time out of the market is very short, or you used derivatives/stablecoin loops to maintain exposure.
• Repetition: The pattern occurs frequently, especially around year-end.
• Offsetting gains: The loss is used to offset a known capital gain (for example, property, shares, or another crypto gain).

From a practice standpoint, the strongest indicator is dominant tax purpose rather than a genuine portfolio rebalance or risk change.

How does Part IVA apply to wash sales involving crypto?

Part IVA (ITAA 1936) is the ATO’s primary tool where it considers an arrangement was entered into with the dominant purpose of obtaining a tax benefit. If Part IVA applies, the Commissioner can cancel the tax benefit (for example, deny all or part of the capital loss) and penalties and interest may follow.

In determining whether Part IVA applies, the ATO and courts consider the overall arrangement and objective factors (the “manner” of the scheme, timing, result, and the taxpayer’s financial position). For crypto, that often means your exchange logs, wallet movements, and whether you materially changed your exposure.

Key practical implication for accountants:

• Even if a disposal technically triggers CGT event A1, Part IVA can still cancel the tax benefit if the loss was generated by a wash sale arrangement.

Are crypto disposals always CGT, or can they be revenue account?

They are not always CGT. Whether your crypto trades are on capital or revenue account depends on facts, including whether you are carrying on a business of trading.

• CGT (investment): Most individual investors are subject to CGT on disposal of crypto (CGT event A1 under ITAA 1997).
• Revenue account (trader/business): If you are carrying on a business of trading, profits may be ordinary income and losses may be deductible, with different integrity considerations.

The ATO’s published crypto guidance emphasises that classification depends on intent, scale, repetition, sophistication, record-keeping, and business-like operations. This distinction matters because “wash sale” concerns can arise in either context, but the computational and evidentiary framework differs.

What practical scenarios commonly create a “wash cycle” in crypto?

Yes—several common behaviours create wash sale risk even when the taxpayer believes they are simply “tax loss harvesting”.

Scenario 1: Year-end loss harvest with immediate rebuy

• Practice risk view: High wash sale risk if the dominant purpose was to generate a loss while maintaining exposure.

Scenario 2: Sell BTC, buy wrapped BTC (WBTC) straight away

• Practice risk view: Elevated risk because your economic exposure is substantially unchanged. The closer the substitute is to the original asset, the stronger the “wash” narrative becomes.

Scenario 3: Sell on one exchange, rebuy on another (or via a related wallet)

• Practice risk view: ATO data-matching and blockchain analytics can still connect this activity. The tax outcome is analysed on substance and purpose, not the exchange venue.

Scenario 4: Sell spot, maintain exposure via perpetual futures

• Practice risk view: Strong “no real change in economic position” argument may arise.

How can you tell if your crypto trades look like a wash sale?

A practical diagnostic used in Australian accounting reviews is to look for “loss + rapid reacquisition + unchanged exposure”.

Use the following indicators as an internal risk check:

• Timing indicator: Repurchase of the same token shortly before/after disposal.
• Exposure indicator: You remained economically exposed through derivatives, wrappers, or correlated substitutes.
• Purpose indicator: Notes/messages/strategy show an intention to “create a tax loss”.
• Pattern indicator: The behaviour repeats across multiple tokens, especially near 30 June.
• Documentation indicator: There is no contemporaneous investment rationale (rebalance, risk reduction, liquidity need).

What records should you keep to support your position with the ATO?

The ATO expects comprehensive crypto records, and the burden of substantiation sits with the taxpayer. For wash-sale risk management, the most persuasive evidence is contemporaneous documentation showing a non-tax rationale.

In practice, maintain:

• Exchange trade confirmations and full transaction history exports
• Wallet addresses, transaction hashes, and transfer records between wallets/exchanges
• Clear parcel selection methodology (for CGT: FIFO or specific identification where properly supported)
• Investment committee notes (for entities) or personal notes (for individuals) explaining:
• Evidence of genuine market risk taken (for example, you stayed out of the position for a meaningful period and did not use derivatives to maintain exposure)

How should accountants treat crypto “wash cycle” risk in 2025 compliance work?

For the 2024–2025 and 2025–2026 Australian tax years, it is prudent to treat wash-sale-like patterns as an integrity risk requiring review, not as an automatic denial.

A robust practice workflow is:

1. Identify disposals at a loss (particularly late June).
2. Check reacquisitions of the same asset (and near-equivalent exposures) in the surrounding period.
3. Review client intent and documentation (dominant purpose analysis).
4. Consider whether the client is on capital or revenue account.
5. If risk is high, document the analysis and consider conservative positions (and/or seek specialist tax advice).

It should be noted that ATO compliance activity in crypto is supported by extensive data-matching programs and third-party reporting, and the evidentiary trail is often stronger than clients assume.

How does MyLedger help accountants review wash-cycle crypto patterns faster?

MyLedger is not a crypto exchange; it is AI accounting software in Australia designed to reduce manual reconciliation and support compliance workflows. For practices dealing with crypto-heavy bank and exchange cashflows, the practical bottleneck is often transaction classification, reconciliation, and workpaper support.

In a crypto review context, MyLedger can assist by:

• Automated bank reconciliation: MyLedger’s AutoRecon reduces reconciliation time from 3–4 hours to 10–15 minutes per client (around 90% faster), freeing time to actually review crypto disposal patterns and tax risk.
• Audit-ready workpapers: Automated working papers reduce reliance on manual Excel schedules, which is where crypto substantiation often breaks down.
• ATO integration accounting software workflows: MyLedger’s ATO integration supports pulling key client details and compliance data into one place, improving end-to-end governance around year-end reporting.

If your practice is spending hours reconciling cash movements before you even start the crypto CGT analysis, accounting automation software is often the fastest lever to reduce risk and lift margin.

Next Steps: how Fedix can help your practice

Fedix built MyLedger to remove manual work from compliance so Australian accountants can focus on judgement areas like crypto CGT, Part IVA risk, and substantiation. If your team is dealing with high-volume transactions (including crypto on/off ramps), learn more about how MyLedger’s AI-powered reconciliation and automated working papers can cut processing time by around 85% and help you handle more clients without adding staff.

• Automated bank reconciliation best practices for year-end (Australia)
• ATO record-keeping checklists for crypto investors
• Division 7A automation and working paper standardisation (for entity groups investing in crypto)

Frequently Asked Questions

Q: Are my crypto trades automatically a wash sale if I buy back within 30 days?

Q: Can the ATO deny my crypto capital loss?

Q: What if I sold one coin and bought a different coin—can that still be a wash cycle?

Q: Does it matter if I’m a crypto investor vs a trader?

Q: What is the safest approach if I want to legitimately rebalance my crypto portfolio?

Disclaimer: This material is general information only and does not constitute tax advice. Australian tax outcomes for crypto depend heavily on your facts, and legislation and ATO guidance can change. You should obtain advice from a registered tax agent or tax lawyer before taking or refraining from action.