When you check your investment portfolio and see it’s gone up in value, you might feel richer—but until you actually sell those assets, your profit is what’s known as an unrealized gain. In 2025, with markets in flux and Australian tax rules evolving, understanding unrealized gains isn’t just an academic exercise—it’s crucial for making smart, forward-thinking financial decisions.
What Is an Unrealized Gain?
Simply put, an unrealized gain is the increase in value of an asset you own but haven’t sold. Think of shares, property, or even cryptocurrency. If you bought 100 shares of an ASX-listed company for $5,000 and their value rises to $7,500, your unrealized gain is $2,500. But until you hit ‘sell’, that gain is just on paper.
- Unrealized gain: The increase in value of an asset you still own.
- Realized gain: The profit you lock in when you sell.
- Unrealized loss: The drop in value of an asset you haven’t sold.
In 2025, the Australian Securities Exchange (ASX) remains volatile, and property prices are showing mixed signals across regions. Many investors are sitting on significant paper gains (or losses), raising the stakes for when and how they choose to realize them.
Why Do Unrealized Gains Matter in 2025?
Unrealized gains can shape your financial life in unexpected ways, especially given recent shifts in Australian policy and market trends:
- Tax Planning: Unrealized gains aren’t taxed until realized, but they can influence your strategy. The Albanese Government’s 2025 budget has reaffirmed no moves towards taxing unrealized capital gains for individual investors—though corporate tax reform debates continue.
- Borrowing Power: Banks may consider unrealized gains as part of your net worth when assessing applications for loans or margin lending, but generally with a conservative haircut, especially for volatile assets like crypto.
- Portfolio Rebalancing: Large unrealized gains in certain assets can skew your asset allocation. In 2025, many Australians are rebalancing portfolios after outsized tech stock runs and a strong start to the year for select property markets.
- Psychological Impact: Watching unrealized gains rise and fall can lead to emotional investing—potentially prompting premature selling or unnecessary risk-taking.
Example: If you bought Bitcoin at $40,000 and it’s now at $90,000, you have an unrealized gain of $50,000. But if the price swings back down before you sell, that gain can evaporate just as quickly.
Unrealized Gains and Tax: What’s New in 2025?
Australians have long enjoyed a tax system that only taxes gains when assets are sold. Here’s the latest on how unrealized gains interact with your tax bill in 2025:
- No Tax on Unrealized Gains (for Individuals): Despite global chatter about taxing wealth and paper gains, the ATO has not introduced taxes on unrealized gains for individuals in 2025.
- Capital Gains Tax (CGT): You pay CGT when you sell, based on the difference between your purchase price and sale price. If you’ve held the asset for over a year, the 50% CGT discount still applies.
- Recordkeeping: Accurate records are more important than ever, with the ATO ramping up data-matching initiatives for property, shares, and digital assets. Don’t lose track of your cost base or acquisition dates.
- Possible Future Changes: While no new taxes on unrealized gains are scheduled for 2025, ongoing discussions about wealth inequality and housing affordability mean the topic isn’t going away. Stay alert for future policy reviews, especially if you hold significant assets.
Tip: If you’re considering selling assets to realize gains in 2025, be aware of your taxable income thresholds, as selling large holdings could push you into a higher tax bracket or impact eligibility for government benefits.
Managing Unrealized Gains: Strategies for Savvy Investors
Smart investors don’t just watch their unrealized gains—they manage them. Here’s how Australians are tackling the challenge in 2025:
- Tax-Loss Harvesting: Consider selling underperforming investments to offset realized gains and reduce your CGT bill.
- Holding for Discounts: If you’re near the 12-month mark, waiting to realize a gain can mean a much lower tax rate thanks to the CGT discount.
- Reinvestment: Some investors opt to sell assets with large gains and reinvest in more diversified or stable options, especially if market conditions look frothy.
- Using Unrealized Gains for Leverage: Homeowners with big unrealized gains in property are tapping into equity for renovations or investing—just remember, borrowing against paper gains comes with risks if the market turns.
Ultimately, the right move depends on your goals, risk tolerance, and life circumstances. But in a year where market swings and tax policy are top-of-mind, understanding the ins and outs of unrealized gains is non-negotiable.
