What are the GST Consequences of crowdfunding income for your business.


GST CONSEQUENCES OF CROWDFUNDING

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.

Contact us at Dolman Bateman or Buildersbooks if you are looking for an experienced accountant or Bookkeeper.

Disclaimer

This information is not to be relied upon without speaking to your accountant, tax agent or financial adviser depending on the advice

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