Should you sell your shares before EOFY?

As we reach the end of the financial year, you may have been taking the time to assess your portfolio. Perhaps some of your share investments no longer fit your needs, or they’ve simply fulfilled your investment thesis for them. You could be cutting your losses or taking a gain. Is it better to sell before the end of the financial year or wait?

I spoke to Hugh Robertson, Chief Executive Officer for Centaur Financial Group, on what investors need to consider when it comes to selling shares.

The tax implications of selling your shares

“Timing is everything from a tax perspective,” Robertson says.

He explains you need to consider capital gains and the impact this may have on your taxable income.

“If you’ve made a gain, it’s added to your taxable income for the year, which may push you into a higher tax bracket. If you have owned the share for more than 12 months, you will be eligible for the 50% capital gains tax (CGT) discount,” he says.

Some investors might choose to crystallise the gain in the next financial year because it means deferring the tax liability for 12 months. There could be a range of reasons they may prefer to defer the liability.

Alternatively, Robertson also notes that crystallising losses can offset gains in other parts of a portfolio calculated as part of taxable income.

Judging timing

Robertson suggests that where it might be efficient to sell shares this year would be:

• If you’ve realised capital gains elsewhere and want to offset those gains.
• If you are in a lower income bracket this financial year compared to what you expect in FY26.
• As a strategy to liquidate funds to take advantage of EOFY opportunities, like super contributions.

By contrast, you might choose to defer making gains if you expect to earn less, perhaps due to working less or retiring, in the next financial year.

Things to keep in mind when it comes to selling shares and tax management

While some investors might be thinking of selling shares purely in terms of what the gains or losses might mean on the surface for their taxable income, Robertson reminds investors to also consider the following before they sell:

• CGT is only paid on realised gains, and if you held the shares for more than 12 months, you receive a 50% discount.
• Taking advantage of concessional and non-concessional super contributions before 30 June can be a valuable long-term financial strategy, and valuable in the end of the financial year if you are eligible for carry-forward or spouse contribution strategies.
• Remember that Australian shares offer franking credits which helps lower the tax burden and may be refunded to you in some instances (aka perhaps those shares may still have a role in the portfolio you didn't initially consider).

Investors should also be careful of “wash sales”.

This is a strategy where an investor might sell shares at a loss to try and reduce their taxable income, only to repurchase in the new financial year a short period of time later. The ATO monitor this activity and may disallow the loss, apply penalties or interest or reclassify the transaction as tax avoidance.

It’s important to document your reasons for selling shares – rebalancing a portfolio, a changed outlook or goals or the desire to purchase a different investment are acceptable reasons to the ATO.

Final tips for the end of the financial year

Robertson views this point of the year as a great opportunity to be proactive. His top tips are:

1. Review your portfolio: Is it still aligned with your goals and risk profile?
2. Maximise super contributions: Consider making concessional or non-concessional contributions before 30 June - especially if you're eligible for carry-forward or spouse contribution strategies.
3. Check your capital gains/losses: Use losses to offset gains if appropriate, and consider tax timing when selling investments. Remember tax rules and your rationale for selling.
4. Prepay deductible expenses: This could include interest on investment loans or insurance premiums, especially if you're expecting a high income this year.

At the end of the day, managing tax and managing investments can be complicated. Speaking to experts on your personal circumstances can help you decide on the right course of action for you - and whether or not to sell your shares.