The S&P/ASX 200 index, which had risen the past five sessions, fell 0.8 percent, or 46.75 points, to 5,760.7 at the close of trade. The benchmark was up nearly 1 percent on Monday.
Financial shares were the worst performers on the index, with their index losing 1 percent, its biggest percentage loss in over a month, on a mix of profit-booking and poor sentiment from losses in US financial stocks.
The 'Big Four' Australian banks lost in a range of 0.5 percent to 1.5 percent, with ANZ recording its biggest percentage loss since mid-November at 1.5 percent lower
Energy shares were bruised by seesawing oil prices, which made a slight recovery from big losses in the previous session. However, analysts see risks that prices might fall.
Oil and gas explorers Oil Search Ltd and Santos Ltd fell 1.3 percent and 1.7 percent, respectively.
While losses on the main index were broad based, miners saw some support from a firm Aussie dollar and higher base metal prices.
Rio Tinto gained 1 percent, while Fortescue added 2 percent. BHP Billiton, which has significant oil exposure, couldn't jump onto the band-wagon and lost 0.4 percent.
New Zealand's benchmark S&P/NZX 50 index was 0.4 percent, or 24.84 points, higher at 7,037.58, led primarily by industrials and utilities.
Financials were the biggest losers.
Mainfreight Ltd and Auckland International Airport , both rising more than 2 percent, were the index's biggest gainers.
ANZ's NZ-listed shares were the biggest net losers on the benchmark.