This article will explain what staking rewards are and how to process these when your Cryptocurrency investment has been set up as an Unlisted Investment or a Custom Holding Account. 

What are Staking Rewards? 

Staking Rewards are income paid to crypto owners in the Cryptocurrency. The money value of additional tokens is ordinary income at the time the fund receives the tokens. It is reported as other income in the Annual Return.

Scenario:

Fund invested 1,070 Polygon tokens as at 28/06/2022 into CoinSpot wallet as staking. The closing total market value as at 28/06/2022 is $3,210. The annual percentage yield set by the exchange is 37.40%. The exchange, earn history shows $100 paid as staking rewards on 29/06/2022. How is this processed in Class?

How to process for Unlisted Investments

Step 1

Navigate to Fund Level > Transactions > Investment Buy > Non-Cash Acquisition 

Refer to the earn history report provided by the exchange for the following details:

1. Select Holding Account 
2. Enter Transfer Date,
3. Enter Quantity
4. Enter 'Market Value' - this the staking reward amount
5. Submit the event.

Processing of this event ensures the cost-base/quantities increase.

Step 2 

Navigate to Fund Level > Transactions > Fund Income > General Investment Income 

1. Select Investment Account i.e., Polygon Coinspot
2. Enter 'Investment Income Type' as General Taxable Income 
3. Enter relevant description
4. Enter Date
5. Enter Gross Payment - this is equal to reward value
6. Submit event

You can now match the events created in Step 1 & Step 2 together via the Match Transactions screen.

Note: Earnings calculations are dependent on Exchange protocols based on time the crypto is staked and the time the earning reward is paid by the exchange. Please refer to reports provided by the exchange platform to record the events in Class to reflect correct accounting dates. The income is mapped to other income in Section B, label S of SMSF Annual Return. Refer to ATO reference provided below for further information.

Section B, label S of SMSF Annual Return - Other Income Code
Staking rewards & airdrops - ATO Link

How to process for Custom Holding Accounts

Step 1 

Navigate to Fund Level > Transactions > Browse Bank Statements

1. Select drop down arrow next to Bank Account and select Custom Holding Account
2. Click +Add
3. Record a  'Cash In' event to capitalise the earnings as cost. The quantity is defaulted as one unit.
4. Save Transaction

Step 2 

Navigate to Fund Level > Transactions > Fund Income > General Investment Income 

1. Select Investment Account i.e., Custom Holding called Coinspotexchange
2. Select Investment Income type as General Taxable Income
3. Enter relevant Description
4. Enter Date
5. Enter Gross Payment - this is equal to reward value
6. Submit. 

You can now match the events created in Step 1 & Step 2 together via the Match Transactions screen.