What are the GST Consequences of crowdfunding income for your business.
Crowdfunding is an increasingly popular form of raising funds for a project. For some businesses it may be hard to gain a large injection of funds for a new project or to sustain current projects. The advantage of crowdfunding is small amounts can add up over time, whilst also building a community of investors.
While crowdfunding is attractive, your business will need to consider the GST treatment of funds received, and related expenses.
Under a donations-based model, what is the GST treatment?
Under this model, the promotor does not supply the contributor with a supply (as the contributor makes the contribution without expecting anything in return). Therefore, the income received does not carry GST.
Under a reward-based model, what is the GST treatment?
Under this model, the promotor provides the contributor with some form of goods/services. As there is a taxable supply made, the income received will carry a GST liability (and must be recorded on your Business Activity Statement).
Under an equity-based model, what is the GST treatment?
Under this model, the promotor (usually a company) provides shares to the contributor in return for the contribution. This transaction is an input-taxed supply and is exempt from GST. Therefore, there is no GST liability on this income.
Under a debt-based model, what is the GST treatment?
Under this model, the promotor enters into a loan arrangement with the contributor. This transaction is an input-taxed supply and is exempt from GST. Therefore, there is no GST liability on
this income.
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Disclaimer
This information is not to be relied upon without speaking to your accountant, tax agent or financial adviser depending on the advice
