Crowdfunding

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.

Crowdfunding is exploding around the world and Australia. In 2014, 3.3 million people pledged more than $500 million on the crowdfunding platform ‘Kickstarter’ to bring more than 22,000 projects to life.

These projects could be as diverse as a life- saving operation, new CD for a band, equity in a new business venture, property investment, or a loan to someone.

The four main crowdfunding models are:

• Donation based.
• Reward based model.
• Equity based model.
• Debt based model.
• 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 by the funder.
• Whether the promoter is carrying on a business in Australia.
• Whether the promoter is registered for GST or required to be registered.