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Edited version of your written advice
Authorisation Number: 1051209565049
Date of Advice: 5 April 2017
Ruling
Subject: Crowdfunding
Question
Will the funds received via a crowd funding campaign for you represent assessable income?
Answer
No.
This ruling applies for the following periods:
Year ending 30 June 2017
The scheme commences on:
1 July 2016
Relevant facts and circumstances
You are a professional driver.
In 20XX your vehicle overturned as a result of a crash and you sustained significant injuries.
Since the accident you have incurred significant and ongoing medical bills.
You have a social media following and a friend started a crowdfunding campaign to help your family with medical care costs and daily living expenses.
The campaign raised $X.
All of these funds have been used to pay medical bills incurred while in hospital and ongoing medical care costs, such as rehabilitation.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Reasons for decision
Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a taxpayer's assessable income includes 'income according to ordinary concepts, which is called ordinary income'. However, 'ordinary income' is not defined in the legislation. It is therefore necessary to look to the courts for guidance on what constitutes 'ordinary income'.
In determining whether an amount is ordinary income, the courts have established the following principles:
What receipts ought to be treated as income must be determined in accordance with ordinary concepts and usages of mankind, except in so far as a statute dictates otherwise
Whether the payment received is income depends upon a close examination of all relevant circumstances, and
Whether the payment received is income is an objective test.
Relevant factors in determining whether a payment is ordinary income include:
Whether the payment is the product of any employment, services rendered, or any business
Whether the payment is expected and relied upon
The character of the payment in the hands of the recipient
Whether the payment is received as a lump sum or periodically, and
The motive of the person making the payment, although this is rarely decisive by itself.
The characterisation of funds an entity receives through crowdfunding will depend on the circumstances of each case. It is the perspective of the recipient of the crowdfunding monies that matters in analysing the tax issues related to crowdfunding.
Generally speaking, gifts do not constitute income according to ordinary concepts. This is provided that such a gift was freely bestowed and was not given for the provision of goods or services. Whether a gift constitutes ordinary income depends on the quality or character of the gift in the hands of the recipient. If the gift is received because of, in respect of, for, or in relation to any income-producing activity of the taxpayer, the gift is generally assessable income. The motive of the donor, recurrence of payments and use of payment by the recipient are also relevant factors in determining whether a payment will be treated as a gift or as ordinary income.
Funds received through crowdfunding may be considered gifts in certain circumstances. For example, contributions which are for the payment of medical expenses, may be classified as a gift. Whether crowdfunding contributions will be classified as gifts will depend entirely on the facts specific to each project.
In your case, we consider that any money raised through your crowdfunding campaign will not have the characteristics of ordinary income on the basis that the reason for the crowdfunding was to raise funds for medical expenses. These expenses are of a personal nature and are not related to your employment or business-like activity that you carry on.
It is considered the contributions to your crowdfunding campaign are better described as a gift and therefore do not constitute ordinary income in your hands. Therefore, any money raised through your crowdfunding campaign to fund the payment of your medical bills and ongoing medical expenses will not be assessable income.
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