Crypto staking, explained properly
Staking earns yield on coins you already hold — real network income on proof-of-stake chains, typically a few percent a year. Here's how it works, what the ATO takes, the risks the ads skip, and a calculator for what compounding rewards amount to.
Projected rewards
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- Gross rewards
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- Est. income tax on rewards
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- After-tax rewards
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- Effective after-tax yield
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Assumes a constant coin price and monthly compounding. In reality the coin's price move will dwarf the yield — staking adds return to an asset you'd hold anyway; it doesn't make a falling one profitable.
Before you stake anything
Unstaking isn't instant — networks impose unbonding periods and platforms add processing queues. Know how long your coins are locked before committing, because you can't sell mid-queue.
Every network has a going rate that all honest platforms roughly share. A platform offering multiples of it isn't staking better — it's doing something else with your coins, and collapses of "earn" products taught how that ends.
Staked through a platform, your coins share the platform's fate. The AFSL tracker shows who's licensed, and our wallet guides cover staking from wallets you control.
FAQ
What actually generates staking rewards?
Proof-of-stake networks like Ethereum, Solana and Cardano select coin-holders to validate transactions, and pay them newly issued coins plus fees for doing it honestly. When you stake, your coins back a validator and you earn a share of those rewards. It's network income, not interest from lending — though many platforms blur the two, and "earn" products that lend your coins out carry very different risks.
How does the ATO tax staking rewards?
Twice, in effect. Rewards are ordinary income at their AUD market value the moment you receive them — taxed at your marginal rate even if you never sell. That value then becomes the cost base for a second, separate CGT event when you eventually dispose of the coins. High-frequency rewards make manual records impractical; crypto tax software tracks every parcel automatically.
What are the risks?
Four main ones: the coin's price can fall further than the yield pays (the dominant risk in practice); unbonding periods can lock coins for days or weeks while prices move; validators can be penalised ("slashed"), reducing staked balances; and on custodial platforms you carry the platform's own risk — the rewards flow through whoever holds the keys. If a platform advertises yields far above the network rate, the extra return is coming from somewhere riskier.
Is staking through an exchange bad?
It's the practical route for most people — solo validation needs technical skill (and for Ethereum, 32 ETH). The trade-off is custody: the platform stakes on your behalf, takes a cut, and holds the keys. Check what the platform actually does with your coins, whether the yield is a true staking pass-through, and how long unstaking takes.
General information only, not financial or tax advice. Reward rates vary continuously and are not guaranteed; the tax estimate applies your selected marginal rate plus no offsets or levies. Confirm your treatment with a registered tax agent.