Edited version of private advice

Authorisation Number: 1051894889085

Date of advice: 3 September 2021

Ruling

Subject: Assessable income

Question

Will the funds received by the entity from crowdfunding for a research project to be conducted by an educational institution be assessable income under Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No

This ruling applies for the following period

1 July 20XX to 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The entity is a Public Company Limited by Guarantee which is initiating a research project to be conducted by an educational institution.

The entity will be charged a fee for the project which is to be paid to the educational institution.

The funds to pay for the research project will be raised by public crowd funding.

Relevant legislative provisions

Section 6-5 of the Income Tax Assessment Act 1997

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'.

Ordinary income has generally been held to include three categories, namely income from rendering personal services, income from property and income from carrying on a business.

Other characteristics of income that have evolved from case law include receipts that are earned, expected, relied upon and have an element of periodicity, recurrence or regularity.

If you earn or receive any money through crowdfunding, some or all of it may be assessable income, depending on the nature of the arrangement, your role in it and your circumstances.

Funds you receive or the profit you make through crowdfunding are likely to be assessable income where you:

•         use crowdfunding in the course of your employment

•         enter into a transaction or scheme with the intention or purpose of making a profit or gain

•         receive money or property in the ordinary course of your business.

The entity is a company limited by guarantee and intends to raise funds to further research projects. It intends to use a crowdfunding internet platform.

We consider that any money raised through the crowdfunding campaign will not have the characteristics of ordinary income on the basis that there is no profitmaking intention, the money received is not in the ordinary course of business, it is not related to employment or earned, expected, relied upon and it does not have an element of periodicity, recurrence or regularity.