With a recorded rainfall of 57mm below average this autumn, it’s little wonder Australian farmers are turning to donations and relief funds to help maintain the vitality of their crops and cattle.
While you may wish to make a donation yourself, it is important to first find out whether the recipient is aware of the tax implications associated with receiving crowdfunding payments.
What is a DGR and how does it affect you?
Donations through crowdfunding platforms of $2.00 or more are generally only tax deductible if paid to a Deductible Gift Recipient (DGR). The ATO encourages anyone interested in donating to a relief fund to do so through a DGR with a focus on rural assistance.
Depending on how the funds are used, payments received through crowdfunding to assist a farming business may be considered assessable income.
If the amounts received are used for emergency relief such as food or clothing, they are not assessable; however, if they are used in the business rather than for the intended purposes of the crowdfunding, they will indeed be assessable.
Where donations are spent on deductible expenses such as feed for livestock, there will be no net taxable outcome, as the income amounts will be offset by the deductions obtained. For most of our Aussie farmers, this means there will be no tax payable on the amounts donated to them for their farm expenses. Notably, income tax will only be paid if the farmer makes a net business profit.