Similarly, if any amount is assessable income then some of the costs related to gaining or producing that income may be allowable deductions, providing you have the appropriate records to substantiate your claims.

The tax laws which apply to investment and financial activity undertaken in a conventional manner (for example, buying goods and services, buying shares, lending money) apply in the same way to investment and financial activity conducted under crowdfunding.

You must keep records explaining all transactions that relate to your tax affairs, including any crowdfunding arrangement. Generally, you need to keep records of most transactions, in English, for five years. The five years starts from when you prepared or obtained the records, or completed the transactions, whichever is the later.

Crowdfunding and disaster assistance

Some crowdfunding platform appeals seek funds to assist businesses, including primary producers affected by severe drought conditions or natural disasters such as bushfires or floods.

How these campaigns affect your assessable income depends on whether you are a promoter or intermediary of these platforms, or if you contribute to a campaign run on these platforms.

Businesses who receive assistance from crowdfunding platforms must consider how these payments affect their tax.

Tax consequences for recipients of drought or disaster assistance

If you or your business receive assistance payments from private funds, charitable groups or crowdfunding platforms the effect on your tax depends on how you use the funds.

Where the payments are intended to be used for business expenses they must be declared as assessable income. However, you may also be able to claim the associated business expenses as tax deductions. For example, if you spent all the money buying livestock feed (a deductible expense) there will be no net effect on your income tax. The increase in assessable income will be offset by the increase in deductions claimed.

If the amounts received are intended to be used for personal emergency relief such as food or clothing, or other such non-business purposes, they are not included in your assessable income.

Visit the ATO website for a full overview of crowdfunding including roles, models and examples. Flor-Hanly Commercial and Agribusiness Accountants in Mackay QLD are tax specialists and Certified Xero Partners. Call us on 07 4963 4800.