Crowdfunding—What Are The Real Implications?

Crowdfunding is the use of small amounts of capital from a large number of individuals to finance a new business venture, generally raised via the internet or social media.

There are usually three parties in a crowdfunding arrangement:

• the initiator of the project or venture (the ‘promoter’)
• the organisation providing the crowdfunding website or platform (the ‘intermediary’)
• individuals or entities that contribute or pledge money (‘funders’)

Websites such as pozible.com, gofundme.com and kickstarter.com allow promoters to reach funders more easily. As a funder, you could assist in financing anything from a short film, to an online business venture.

There may be tax or GST implications for members in the crowdfunding arrangement, depending on the facts and circumstances. For example, income may be assessable income, and you may be able to claim tax deductions against the income.

It is a growing space that is constantly evolving, however the ATO does offer some information to assist in determining whether your income is taxable.

By Elouise Barker

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