Unrealised Loss in Australia: 2026 Guide for Investors

An unrealised loss occurs when the value of an asset you own falls below the price you paid for it, but you haven’t sold it yet. It’s often called a “paper loss” because it only exists on paper until you decide to sell the asset. For example, if you purchased shares for $10,000 and their current market value is $8,000, you have an unrealised loss of $2,000.

• Unrealised loss: The difference between your purchase price and the current lower market value, as long as you still hold the asset.
• Realised loss: When you sell the asset for less than you paid, the loss becomes realised and is recorded for tax purposes.

This distinction is important for tax planning, investment strategy, and understanding your true financial position. Unrealised losses can affect how you feel about your investments, but they don’t have an immediate impact on your tax obligations or cash flow.

Several factors in 2026 are shaping how Australian investors experience and manage unrealised losses:

Market Volatility

Australian and global markets continue to react to changes in interest rates, economic policy, and global events. These factors can cause sharp swings in asset prices, leading to periods where many investors see unrealised losses in their portfolios. While these losses can be concerning, they are often temporary and may reverse as markets recover.

Taxation Rules

The Australian Taxation Office (ATO) treats unrealised losses differently from realised losses. Unrealised losses do not affect your tax position until you actually sell the asset and the loss becomes realised. However, keeping track of unrealised losses can help with future tax planning, especially if you are considering selling assets to offset capital gains.

Recent updates to capital loss carry-forward rules mean it’s important to monitor your portfolio’s performance, even if you’re not planning to sell immediately. If you do realise a loss, you may be able to use it to offset capital gains in the same year or in future years.

Superannuation Considerations

Changes to superannuation rules, particularly for members with larger balances, have increased the focus on how unrealised gains and losses are treated within super funds. For some super fund members, unrealised losses may influence the calculation of notional earnings and, in turn, affect tax outcomes. If your super fund experiences a decline in asset values, those unrealised losses could reduce the amount of notional earnings reported for tax purposes.

Unrealised losses are a normal part of investing, but how you respond to them can make a big difference to your long-term results. Here are some practical strategies for managing unrealised losses in 2026:

Review Your Investment Fundamentals

If your investment thesis remains strong and the fundamentals of your assets haven’t changed, short-term losses may not be a reason to sell. Markets can be volatile, and prices often recover over time. For long-term goals, such as retirement or funding your children’s education, staying invested can help you avoid locking in losses unnecessarily.

Consider Tax-Loss Harvesting

Some investors choose to realise losses by selling underperforming assets, using those losses to offset capital gains elsewhere in their portfolio. This strategy, known as tax-loss harvesting, can be effective, but it’s important to be aware of the ATO’s rules. In particular, the ‘wash sale’ rules prevent you from immediately repurchasing the same or a substantially similar asset just to claim a tax benefit.

Rebalance Your Portfolio

Unrealised losses may indicate that your portfolio’s asset allocation has shifted. If losses are concentrated in a particular sector or asset class, it could be a good time to review your overall investment mix. Rebalancing can help you maintain your desired level of risk and ensure your investments remain aligned with your goals. For more on portfolio management, see our finance section.

Superannuation Strategy

For those with self-managed super funds (SMSFs) or larger super balances, understanding the treatment of unrealised gains and losses is increasingly important. Work with your fund administrator or financial adviser to ensure your fund’s reporting is accurate and that you’re making the most of any opportunities to manage your tax position.

While it’s natural to feel concerned about unrealised losses, there are some pitfalls to watch out for:

• Ignoring unrealised losses: Even though they don’t affect your tax bill immediately, ignoring them can lead to missed opportunities for tax planning or portfolio improvement.
• Reacting to short-term volatility: Markets fluctuate daily. Making decisions based on short-term price movements can lead to poor outcomes, especially if you sell quality assets at a loss.
• Making impulsive decisions: Selling in a panic can turn a temporary paper loss into a permanent realised loss. Take time to review your strategy and seek professional advice if needed.

Unrealised losses are an inevitable part of investing, especially in a dynamic market like Australia’s in 2026. Rather than viewing them purely as setbacks, consider them as signals to review your investment approach, check your asset allocation, and plan for the future. By staying informed and making decisions based on your long-term objectives, you can use periods of unrealised loss to strengthen your portfolio and build lasting wealth.

Remember, investment markets move in cycles. Today’s paper loss could become tomorrow’s gain if you remain patient and focused on your goals. Use unrealised losses as an opportunity to refine your strategy and make choices that support your financial wellbeing.