Staking rewards and many decentralised finance (DeFi) transactions are taxable in Australia even if you never cash out to Australian dollars. The ATO treats additional tokens you receive as income when you receive them, at their Australian dollar market value. It also treats many DeFi deposits, "loans" and wraps as capital gains tax events, because you dispose of one asset or right and acquire another.

Those rules sit on top of the ordinary crypto CGT framework in the crypto tax in Australia guide. Simple moves between wallets you own are different, and are covered in crypto wallet transfers and tax. A standard crypto tax calculator may not classify DeFi transactions correctly unless you map them yourself.

This is general information only. It is not personal advice or a tax assessment. DeFi protocols differ, and the ATO says you need to look at the terms and the actual operation of the protocol. Some wrapping guidance is still in draft form, as noted below.

How is staking taxed?

Staking involves locking or committing existing tokens to help validate transactions, or to support a network, in return for additional tokens or similar rewards.

The ATO says you must declare the rewards you receive from staking crypto assets. Those rewards are often additional tokens from holding the original tokens. You convert the value into Australian dollars at the time you receive them, and you report that amount in your tax return, usually at "Other income".

The market value at that time also becomes the cost base of the new tokens. When you later sell, swap or otherwise dispose of the reward tokens, you work out a separate capital gain or loss against that cost base. You do not use a nil cost base simply because you did not buy the rewards with cash.

The original tokens you staked may or may not have been disposed of. That depends on whether you kept ownership of those tokens, or whether the staking arrangement involved exchanging them for another token or a right. Some arrangements leave you holding a different token that represents the staked position. If ownership of the original asset ends, a CGT event can happen at the time you stake, in the same way the ATO describes for many DeFi deposits. If you merely lock tokens you still own, the staking event itself may not be a disposal of the original holding, but the rewards are still income. The facts of the protocol matter. If the amounts are material, get advice rather than assuming every "stake" button works the same way.

Rewards paid in a different token from the one you staked are still valued in Australian dollars when received. Fees paid in crypto to stake or to claim rewards can themselves be disposals of the fee amount, as with other network fees.

How are DeFi rewards and "interest" taxed?

DeFi platforms may pay a return or yield for crypto placed in the protocol. The ATO says that if you receive periodic rewards in the form of a crypto asset from a DeFi platform, you must report the market value of that reward at the time of receipt as assessable income. It describes those rewards as being taxed similarly to interest income.

In the ATO's example, a taxpayer "lends" 100 stablecoin tokens valued at $10 each through a DeFi platform that pays a 1% return in newly issued stablecoin tokens. The taxpayer declares $10 as income, and that $10 is the cost base of the new tokens.

The everyday words "interest" and "lending" do not automatically import the tax rules that apply to a bank deposit or to securities lending. The ATO is explicit about that. You still have to consider whether a CGT event happened when the assets were first placed in the protocol, which is the next question.

Does depositing into DeFi trigger capital gains tax?

Often, yes.

The ATO says capital gains can arise in a DeFi environment, and that the most likely CGT events are A1, E2, C2 or H2, depending on the structure. It tells you to consider whether you are dealing with another entity, and whether a trust relationship arises.

Lending and borrowing

Many DeFi "lending" and "borrowing" arrangements result in a CGT event, because beneficial ownership of the crypto asset ends. The arrangements typically involve exchanging one crypto asset for another, or exchanging a crypto asset for a right to receive an equivalent number of the same asset in the future.

In general, the ATO says a CGT event happens if you transfer a fungible crypto asset to an address that you do not control, and that already has a balance of the same fungible crypto asset. The capital proceeds are the market value of the property you receive in return, which may be another crypto asset or a right.

The ATO works through this in two examples.

Sasha had bought 100 of a token for $800. She "lends" 50 of those tokens, then worth $500, and under the contract she does not maintain beneficial ownership. A CGT event happens, and she has a capital gain of $100 at the time of the "loan".

Mika bought 100 tokens for $1,000 and "lent" them to a DeFi platform. The terms were unclear about beneficial ownership, and the platform pooled the tokens at the same address as tokens from other "lenders". Because the tokens are fungible, a CGT event happens at the time of the initial "loan". Mika received a right to get 100 tokens back, then valued at $900, so she had a capital loss of $100, and the right had a cost base of $900. Three months later the "loan" was repaid with 100 tokens then worth $1,000. The right was satisfied, she made a $100 capital gain, and the 100 tokens she received had a cost base of $1,000.

The income tax rules that apply to securities lending do not apply to crypto asset "lending".

Liquidity pools

A liquidity pool locks crypto assets in a smart contract to facilitate trading or lending. In return for depositing assets, a liquidity provider receives new crypto assets or rights that represent a share of the pool, and may also receive a share of fees.

The ATO says a CGT event happens when you deposit your crypto assets into the liquidity pool. The capital proceeds are the market value of the property you receive in return. When you later withdraw, a CGT event happens to the crypto asset or right you received on the original deposit, and the proceeds are the market value of the assets you withdraw.

In the ATO's example, Martha deposits one token she acquired three years earlier for $2. She receives 20 pool tokens worth $20. The deposit is a CGT event, and she has a capital gain of $18. She may be eligible for the CGT 50% discount, because she had held the deposited asset for at least 12 months under the current rules.

Two practical points follow. First, you can have a taxable gain on a deposit even if you later withdraw the "same" value and never cash out to Australian dollars. Second, the pool tokens are a new asset. Their holding period starts when you receive them, and their cost base is the market value at that time. When you withdraw, you dispose of those pool tokens or rights, not of the original deposit in a single unbroken holding.

Fee or reward tokens paid while you are in the pool are usually income when received, as described above, with a cost base equal to that market value.

How is wrapping and unwrapping taxed?

A wrapped token is a crypto asset tied to the value of another crypto asset. It is often created so that a token from one blockchain, or one token standard, can be used on another.

The ATO's published guidance focuses on wrapping and unwrapping using a smart contract. You send the original asset to the contract's address, the original asset is locked, and you receive a wrapped version. The ATO says CGT event C2 happens when you send the original asset to the contract, because you no longer control that asset through your private key.

The capital proceeds are the market value of the wrapped asset you receive, which will usually correspond to the market value of the original asset at that time. The first element of the cost base of the wrapped asset is that same market value.

In the ATO's example, Kal bought 5 ETH for $10,000. Four years later he wraps them when they are worth $30,000. CGT event C2 happens, and he has a capital gain of $20,000. The 5 wrapped tokens have a cost base of $30,000. The example excludes gas or platform fees. Because he had held the ETH for four years, he may be eligible for the current 50% discount on that $20,000 gain.

Unwrapping is a separate CGT event. CGT event C2 happens when the wrapped asset is burnt under the contract. The proceeds are the market value of the new original-type asset you receive, and that new holding has a cost base equal to that market value.

When Kal later unwraps, the wrapped tokens are burnt and he receives 5 ETH valued at $28,000. He makes a capital loss of $2,000, because his cost base in the wrapped tokens was $30,000. The 5 ETH he receives have a cost base of $28,000. Their holding period starts at the unwrap, not at the original purchase years earlier.

That is why wrapping is not a tax-free transfer, and why it can also interrupt the 12-month clock for later discounts. A later sale of the unwrapped asset is measured against the new cost base.

The ATO has also issued Draft Taxation Determination TD 2026/D2 on the CGT consequences of using a smart contract to wrap and unwrap crypto assets. It is draft guidance, not a final determination. It describes the same C2 analysis for the style of wrapping set out in the published webpage. Other wrapping methods may fall outside that description. Never Lose Interest will update this guide if the determination is finalised in different terms.

From 1 July 2027, gains that accrue from that date are subject to cost base indexation and a 30% minimum tax, rather than the 50% discount, for individuals, trusts and partnerships that have held the relevant CGT asset for at least 12 months. A wrap that happens after that date is still a realisation. Plan for the new settings on post-1 July 2027 gains, as explained in CGT old versus new rules.

What records do I need?

DeFi and staking produce more events, and more assets, than a simple buy and sell. For each stake, reward, deposit, withdrawal, wrap and unwrap, keep:

  • the date and time
  • the protocol or contract address, and a description of what you did
  • the quantity and type of each asset or right that left and each that arrived
  • the Australian dollar market value at that time
  • fees, including gas, and whether they were paid in crypto
  • enough information to identify the parcel and its original cost base

The ATO already asks you to keep documents showing the date and quantity of crypto assets received via staking or airdrop, and to export histories regularly because platforms can close. On-chain activity will not always appear in an exchange CSV. If a calculator cannot classify a transaction, record it manually rather than letting the software treat it as a transfer between your own wallets.

Frequently asked questions

Do I pay tax on staking rewards if I have not sold them?

Yes, in the usual case. The ATO treats the Australian dollar value of staking rewards as income when you receive them. A later sale is a separate CGT event against the cost base created at that time.

If I withdraw the same tokens I deposited, can I ignore the deposit?

Not if a CGT event happened when you deposited or "lent" the tokens. The ATO's examples show a gain or loss at the time of the deposit or loan, and another CGT event when the position is closed, even if the same type and number of tokens come back.

Does wrapping reset my 12-month holding period?

The wrap disposes of the original asset and starts a new holding period for the wrapped asset. Unwrapping disposes of the wrapped asset and starts a new holding period for the asset you receive back. The years you held the original token before the wrap do not attach to the unwrapped holding.

Are airdrops taxed the same way as staking rewards?

Not always. The ATO distinguishes airdrops received as a reward for goods or services, or as part of another income-producing activity, from airdrops received in other circumstances. The former are income when received. The latter may not be included in assessable income at that time, although a later CGT event can still happen, and the cost base is still the market value when the airdrop was received, which may be nil or negligible. The crypto tax in Australia guide covers that distinction.

Can a crypto tax calculator work this out automatically?

Sometimes, if you can import complete records and if the software recognises the protocol. Many calculators mis-label wraps, pool deposits and on-chain rewards as transfers. Check the classification, then check the Australian dollar values, before you rely on the result.

General information warning

This article is general information only. It is not personal advice, tax advice or a calculation of your notice of assessment. It does not take into account your objectives, financial situation or needs. The ATO's wrapping determination TD 2026/D2 was still in draft as at November 2026, and the tax result for a particular protocol depends on its terms and on how it actually operates. Consider speaking with a registered tax agent if you have material staking or DeFi activity.

Sources

  • Australian Taxation Office, Decentralised finance and wrapping crypto, last updated 19 August 2026, including the official examples on lending, liquidity pools, DeFi rewards and wrapping.
  • Australian Taxation Office, Draft Taxation Determination TD 2026/D2, Income tax: capital gains tax consequences of using a smart contract to wrap and unwrap crypto assets.
  • Australian Taxation Office, Tax and crypto asset investments, last updated 1 July 2026, on staking rewards, airdrops and record keeping.
  • Australian Taxation Office, Crypto asset investments.
  • Treasury Laws Amendment (Tax Reform No. 1) Act 2026, for the CGT changes from 1 July 2027.

Last reviewed: November 2026.