Is there GST on crowdfunding? Do I pay tax on it?

By October 21, 2015 Funding, Tax

GST ON CROWDFUNDING

Crowdfunding is a popular way of funding projects, whether they be software development, an indie film, or an artist’s new record. As with any business undertaking, it’s important to understand the implications of this type of funding so you don’t get yourself into any trouble.

The first question to ask yourself is whether or not the crowdfunding represents the activities of a hobby or a business. There are a bunch of different indicators to help you make this decision. Take a look here. If it turns out to be a hobby, then there shouldn’t be any tax implications in relation to the crowdfunding.

Now, if the crowdfunding project relates to your business then all the money you raise will be considered to be taxable income. This usually isn’t a big deal because the funds are being raised to cover expenses. Taxable income in and deductible costs out generally means no taxable income leftover in relation to the project.

As for the GST, you’ll want to determine which model you’ll be using (examples include the “funding as donation” model and the “funding for reward” model) as this will dictate whether or not you have a GST liability. Typically GST will apply when you give your supporters something in exchange for their funding other than debt, equity, or simply saying thanks. For example, if you give each supporter a copy of the album you make as a result of the project, then the ATO would expect to receive some GST just the same as if you had sold your supporter the album.

There is some more guidance on the GST implications here. The above is general in nature only. If you have any questions in relation to your specific situation please give us a call.