CROWD RECEIPTS TAXED EARLY?

In a recent tax advisory notice from the Australian Tax Office the industry was reminded that business like crowdfunding activities will be subject to income tax.
Whist the guidance is welcome and somewhat instructional industry proponents say that it leaves the impression that  crowd initiated business taxed upfront, which is not generally the case when compared to other start-ups.
Crowd Funding Institute of Australia Chairman Matthew Pinter says ‘if you read the guide latterly, it puts successful rewards based crowdfunded startups at a disadvantage, taking tax on money from backers event before the product exists. It’s irrational when most other countries are offering tax write-offs and incentives; our tax office appears to want a cut of the money upfront’.
‘We surveyed a number of tax agents who universally disagreed with taxing a product prepayment prior to its invention, commercialisation & shipment.’ Pinter says the ATO doesn’t apply this standard to small businesses citing the ‘Arthur Murray’ rule and says the guide reflects a lack of understanding of the basic principles in crowdfunding.
Startups using rewards based crowdfunding ask ‘backers’ to prepay for products or services to aid  development and test the market, so it is difficult to see how these ventures would be profitable at this stage, particularly given the money is refundable (a listing condition on most platforms).
Pinter is calling for the ATO to revisit the guide and promote incentives for Australian start-ups such as the R&D concession. ‘Clearly the ATO want to protect revenue, though in the long run these are job / tax generators so we need to apply the rules fairly and let them have a go’.