In response to the current drought, our clients may wish to make a donation to a relief fund. It’s important when doing so, that you are aware of the tax implications associated with making donations via crowdfunding and receiving crowdfunding payments.
If you plan to donate to drought relief, the best way to do so is through an organisation that is a deductible gift recipient (DGR), and has a focus on rural assistance. Donations of $2.00 or more will be tax deductible where donations are made through these registered charities. Donations to crowdfunding platforms are generally only tax deductible if paid to a DGR.
Payments received from crowdfunding platforms to assist the farming business may be assessable income depending on how the funds are used.
The amounts received are not assessable if they are used for emergency relief, such as food and clothing.
However, the amounts received will be assessable if they are used in the business rather than the intended purpose.
It is important to note though, that where the amounts are spent on deductible expenses, such as purchasing feed for livestock, there will be no net taxable outcome, as the income amounts will be offset by the deductions. This means, for most farmers, there will be no tax payable in relation to money donated to them for their farm expenses. Income tax will only be paid if the farmer makes a net business profit.
The Australia Taxtion Office has a range of support measures available to help drought-affected clients who are having difficulties meeting their tax and super commitments or who are struggling with their mental health.
Please contact our office if you would like to discuss your personal situation.