Tax tips, non-equity crowding funding and gst

In this Tax Tip Tuesday, we look at non-equity crowdfunding and GST and the implications for startups Australia wide.

Crowdfunding allows those with a brilliant idea or project to get it off the ground by asking the ‘crowd’ for financial support. Common crowdfunding platforms include Kickstarter and Pozible.

In the last week, the ATO has provided guidance to a Federal Government committee that companies using crowdfunding websites may be required to levy GST on donations if they provide something of value in return.

The ATO told the committee that the GST treatment of contributions would depend on a range of factors including:

  • whether the transaction takes place in Australia
  • the entity asking for the contributions is registered for GST
  • what the contributor gets in return.

“In general terms, GST is only payable by an entity where it is GST registered or required to be, and it supplies something of value in return for a ‘donation’ from a contributor in Australia.

“However, no GST should be payable by the entity where a contributor gets an equity or debt interest in return for the contribution,” the ATO advised.

This Tax Tips Tuesday is brought to you with love by Nudge Accounting. You can read other Tax Tips here.