Crowdfunding is an effective way to find a large number of supporters and contributors who can provide funds for a cause, project or venture. Often conducted through benefit events, internet platforms, websites, or mail-order subscriptions, crowdfunding is increasingly popular although many are unaware of its tax implications. If you are involved in crowdfunding, you may face tax consequences as an initiator, intermediary, or contributor. Consult an experienced tax professional to learn more about your tax obligations related to crowdfunding.
In a crowdfunding situation, you can be:
An initiator or campaign creator;
An intermediary or organisation providing the platform for crowdfunding; or
Each of these roles can face tax consequences, depending on the nature of your role and circumstances.
Contribution as income
If you receive contributions through crowdfunding, it’s important to determine whether the amount you receive is assessable as income. Contributions that are considered as income must be included in your income tax return. You can also claim some of the costs relating to that income as deductions, provided you are able to substantiate your claims with appropriate records.
GST liability for intermediary
The intermediary may be liable for GST if it provides services to the promoter for a consideration and the services are connected to Australia.
Claiming deductions for crowdfunding
If you provided funds to a project that will increase the sales and income of your business, you can claim the value of your contribution as a deduction. You should always keep good records of all income and expenses related to crowdfunding in order to claim a deduction.
Importance of tax and accounting professional
As crowdfunding models evolve, the respective tax obligations of initiators, intermediaries, and funders can change, depending on the actual circumstances of their participation. An experienced tax and accounting professional can examine the crowdfunding arrangement and determine income tax, GST, and other tax implications for a particular person.
At ATP Tax Accountants Pty Ltd, our tax accountants have been serving people and businesses throughout Western Sydney by providing a wide range of services such as taxation advisory and bookkeeping to ensure compliance with all your crowdfunding tax obligations.
We invite you to call us during business hours on 1-300-829-484 or email us at any time to learn more about how we can help you.