NFT Royalties: How Ongoing Secondary Sale Income Is Taxed in Australia
Many NFT collections pay their original creator a royalty on every secondary sale that happens afterwards, distributed automatically by the marketplace or the smart contract itself. For a creator, this can turn a single collection into a long-running, recurring income stream, potentially for years after the original mint. That recurring nature is exactly why royalties deserve their own focused look, separate from the tax treatment of the original sale covered in the broader guide to NFT tax in Australia and the specific mechanics of NFT minting.
As of 1 July 2027, CGT rules in Australia are set to change. Please visit this page for the revised tax rules.
Royalties Are Ordinary Income, Received Repeatedly
Each royalty payment a creator receives is generally treated as ordinary assessable income at its AUD value on the date it is received, entirely separate from the CGT or income treatment of the original sale that created the collection. Because royalties can arrive irregularly and in small amounts, sometimes dozens or hundreds of times across a financial year depending on the collection’s trading activity, they need to be tracked individually rather than assumed to net out to something roughly reasonable at year end.
This income needs to be assessed in the financial year it is received, which for an actively traded collection could mean royalty income spread unevenly across many months. Creators should understand how this fits into carrying on a business more broadly, since a creator with an actively trading collection generating regular royalties looks considerably more like an ongoing commercial activity than someone who minted a single, one-off piece.
Tracking Royalties Across Marketplaces
Understanding how NFT marketplaces actually distribute royalty payments is important practical context, because mechanisms vary. Some marketplaces enforce royalties automatically at the smart contract level, others route payments off-chain or make them optional for the buyer, and a growing number of marketplaces have moved away from enforcing royalties altogether. A creator whose collection trades across several platforms needs to reconcile royalty income from each one individually, facing a similar challenge to an investor tracking activity across multiple wallets and exchanges, and the same disciplined record-keeping applies.
Royalties paid in a token other than the one originally used to mint or sell the collection add a further wrinkle, since receiving a different asset as royalty income sets its own cost base for that specific token, separate from whatever the creator holds from the original sale. This is where creators working across formats, including those exploring NFTs beyond traditional art or the music industry’s use of NFTs and blockchain, need to pay particular attention, since royalty structures in these spaces are not always as standardised as they are for straightforward digital art collections.
Reporting and Practical Compliance
Royalty income needs to be reported as part of ordinary assessable income through the standard process in how to declare cryptocurrency on an Australian tax return, alongside any other crypto income the creator has for the year. Given how many small, individual payments an actively trading collection can generate, the same practical guidance covered in reporting hundreds of crypto transactions is directly relevant here, even though the underlying activity is royalty income rather than trading.
Royalty payments flowing into an Australian exchange or wallet sit within the same ATO tracking capability and data matching program that applies to any other crypto income, and creators generating meaningful, ongoing royalty income should treat the compliance obligation with the same seriousness as any other recurring revenue stream. Where a collection ultimately fails to sustain secondary trading and royalty income simply stops, there is no specific tax consequence to that decline itself, it simply means future periods have less, or no, royalty income to report.
Key Takeaways
NFT royalties are generally ordinary income at the AUD value received, assessed separately from the original minting sale and potentially recurring for as long as the collection keeps trading. Royalty mechanics vary meaningfully between marketplaces, and creators need to reconcile income across every platform their collection trades on. Royalties paid in a different token to the original sale establish their own separate cost base. Given the potential volume of small, irregular payments, disciplined, ongoing record-keeping is essential to report this income accurately.
Shepley Capital provides education and market insights, not financial advice. Always conduct your own research before making any investment decisions.
Frequently Asked Questions
What is NFT Royalties?
Many NFT collections pay their original creator a royalty on every secondary sale that happens afterwards, distributed automatically by the marketplace or the smart contract itself. For a creator, this can turn a single collection into a long-running, recurring income stream, potentially for years after the original mint. That recurring nature is exactly why royalties deserve their own focused look, separate from the tax treatment of the original sale covered in the broader guide to NFT tax in Australia and the specific mechanics of NFT minting.
Why are NFT royalties treated as ordinary income?
Each royalty payment a creator receives is generally treated as ordinary assessable income at its AUD value on the date it is received, entirely separate from the CGT or income treatment of the original sale that created the collection. Because royalties can arrive irregularly and in small amounts, sometimes dozens or hundreds of times across a financial year depending on the collection's trading activity, they need to be tracked individually rather than assumed to net out to something roughly reasonable at year end.
How do you track royalties across different marketplaces?
Understanding how NFT marketplaces actually distribute royalty payments is important practical context, because mechanisms vary. Some marketplaces enforce royalties automatically at the smart contract level, others route payments off-chain or make them optional for the buyer, and a growing number of marketplaces have moved away from enforcing royalties altogether. A creator whose collection trades across several platforms needs to reconcile royalty income from each one individually, facing a similar challenge to an investor tracking activity across multiple wallets and exchanges, and the same disciplined record-keeping applies.
How should royalty income be reported?
Royalty income needs to be reported as part of ordinary assessable income through the standard process in how to declare cryptocurrency on an Australian tax return, alongside any other crypto income the creator has for the year. Given how many small, individual payments an actively trading collection can generate, the same practical guidance covered in reporting hundreds of crypto transactions is directly relevant here, even though the underlying activity is royalty income rather than trading.
What are the key points on NFT royalty tax?
NFT royalties are generally ordinary income at the AUD value received, assessed separately from the original minting sale and potentially recurring for as long as the collection keeps trading. Royalty mechanics vary meaningfully between marketplaces, and creators need to reconcile income across every platform their collection trades on. Royalties paid in a different token to the original sale establish their own separate cost base.
What are the ATO reporting requirements for NFT Royalties?
Each royalty payment is generally ordinary assessable income at its AUD value on the date received, reported in the income section separately from the original minting sale. Because royalties arrive in crypto, that same AUD value becomes the cost base for the tokens received, and disposing of them later is a separate CGT event. Every payment needs a dated AUD record, which is demanding given royalties can arrive continuously.
How does NFT Royalties affect Australian crypto investors?
The practical consequence for Australian creators is a long tail of small, irregular income events, potentially continuing for years after the original sale. Marketplace mechanisms differ, and some enforce royalties on-chain while others treat them as optional, so payments can stop without notice. Creators who do not capture each receipt at the time face a difficult reconstruction, since marketplace records may not remain accessible.
What records should I keep for NFT Royalties in Australia?
The ATO requires you to keep detailed records for all crypto transactions, including dates, amounts in AUD, wallet addresses, and the purpose of each transaction. Good records are essential for accurately calculating your tax obligations.
WRITTEN & REVIEWED BY Chris Shepley
UPDATED: SEPTEMBER 2026
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