GST and crowdfunding

For GST, luxury car tax and wine equalisation tax purposes, from 1 July 2015, where the term ‘Australia’ is used in this document, it is referring to the ‘indirect tax zone’ as defined in subsection 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Crowdfunding involves using the internet and social media to raise funds for specific projects or particular business ventures. Typically the promoter of the project or venture will engage an intermediary to operate an online platform that allows the promoter to connect to potential funders. Various models are used to attract funding.

Find out about:

• GST treatment
• Crowdfunding models and GST implications
• More information

GST treatment

The GST treatment of crowdfunding for a promoter operating in Australia may vary according to:

• the model adopted and what supplies (if any) are made to the funder
• whether the promoter is carrying on an enterprise
• whether the promoter is registered for GST, or required to be registered
• whether the promoter makes supplies that are connected with Australia
• whether the funder is in Australia.

The intermediary will have a GST liability for services to the promoter if:

• the intermediary is carrying on an enterprise
• the intermediary is registered for GST, or required to be registered
• the intermediary provides the services for consideration
• the services are connected with Australia.

From 1 July 2017 supplies made by a non-resident promoter or intermediary may be subject to GST.

However, for the purposes of the information below, it is assumed that both the promoter and the intermediary carry on an enterprise in Australia and are registered for GST. The intermediary provides services to the promoter and the promoter pays for those services. The funders are also in Australia.

Crowdfunding models and GST implications

The main crowdfunding models to emerge so far involve:

• donation-based funding
• reward-based funding
• equity-based funding
• debt-based funding.

Donation-based model

Under the donation-based model, a funder makes a payment to the project or venture without receiving anything in return. The promoter does not make any supply to the funder and does not have any GST liability.

If the promoter simply acknowledges the payment (for example, by an entry on a website), the payment made by the funder is not consideration for any supply made by the promoter, either in return or to another party. Accordingly, the funder is not entitled to an input tax credit. The intermediary makes a taxable supply of services to the promoter.

Reward-based model

Under a reward-based model, the promoter provides goods, services or rights in return for payments by funders. The promoter will have a GST liability if a taxable supply is made to the funder.

If the promoter makes a taxable supply, the funder is entitled to an input tax credit if the funder is registered for GST and the acquisition is made for a creditable purpose. Generally, no input tax credit is available if the acquisition relates to the funder making input taxed supplies. The intermediary makes a taxable supply of services to the promoter.

Equity-based model

Under an equity-based model, the funder makes a payment in return for an interest in the equity of the promoter. Typically this will occur when the promoter is a company in which the funder acquires shares in return for their payment. Supply of shares is an input taxed financial supply that is not subject to GST. The funder is not entitled to an input tax credit for the acquisition of the shares. The intermediary makes a taxable supply of services to the promoter.

Input tax credits are typically not available for acquisitions that relate to the promoter making input taxed supplies. However, if certain circumstances are satisfied, the funder may be entitled to input tax credits for acquisitions that relate to the making of input taxed financial supplies. Guidance on when an input tax credit may be available can be obtained in the public rulings listed in more information.

Debt-based model

Under a debt-based model, the funder loans money to the promoter who agrees to pay the interest in return. Under this type of arrangement, the promoter makes an input taxed supply of an interest in or under a debt to the funder. The funder makes an input taxed supply of an interest in or under a credit arrangement to the promoter. Accordingly, no GST liability arises, and the funder is not entitled to an input tax credit for the acquisition made from the promoter. The intermediary makes a taxable supply of services to the promoter.

Input tax credits are typically not available for acquisitions that relate to the promoter making input taxed supplies. However, if certain circumstances are satisfied, the funder may be entitled to input tax credits for acquisitions that relate to the making of input taxed financial supplies. Guidance on when an input tax credit may be available can be obtained in the public rulings listed in more information

More information

More information can be found at:

• GSTR 2002/2 Goods and services tax: GST treatment of financial supplies and related supplies and acquisitions
• GSTR 2003/8 Goods and services tax: supply of rights for use outside Australia - subsection 38-190(1), item 4, paragraph (a) and subsection 38-190(2)
• GSTR 2003/9 Goods and Services Tax: financial acquisitions threshold
• GSTR 2004/1 Goods and services tax: reduced credit acquisitions
• GSTR 2004/7 in the application of items 2 and 3 and paragraph (b) of item 4 in the table in subsection 38-190(1) of the GST Act  
  • when is a ‘non-resident’ or other ‘recipient’ of a supply ‘not in Australia when the thing supplied is done’?
  • when is ‘an entity that is not an Australian resident’ ‘outside Australia when the thing supplied is done’?
   
• GSTR 2006/3 Goods and services tax: determining the extent of creditable purpose for providers of financial supplies
• GSTR 2008/1 Goods and services tax: when do you acquire anything or import goods solely or partly for a creditable purpose?
• GSTR 2019/1 Goods and services tax: supply of anything other than goods or real property connected with the indirect tax zone (Australia)
• LCG 2016/1 GST and carrying on an enterprise in the indirect tax zone (Australia)
• LCR 2017/1 Superannuation reform: capped defined benefit income streams - pensions or annuities paid from non-commutable, life expectancy or market linked products
• LCR 2018/2 GST on supplies made through electronic distribution platforms
• International taxation of goods and services supplied to Australia

Details the GST implications of raising funds for specific projects or particular business ventures through the internet and social media.