Crowdfunding: a licence to collect money?

Tragedy has just struck your friend at work. There are going to be big costs, and you want to help. In the old days, you’d send the hat around; these days you’d start a collection on the internet using a crowdfunding platform. See here for examples.

You’ll need a bit more than a hat, but not much. After just a few easy steps you can be asking the world for money to help your friend. I tested it. No catches, nothing onerous, no regulation, no promising to do anything.

Well, not that most people will notice anyway. Because most people don’t read the small print, the terms and conditions of using the service. In these it’s odds on that you will find that it is your responsibility to comply with all applicable laws and regulations. See the third last section here for an example.

And by starting the crowdfunding campaign you have entered the world of fundraising, and that, I’m afraid, is regulated. And in Australia, because of our federal system, there’s not one set of laws and one department to deal with, but potentially one (or more) for each of our eight states/territories.

So for the conscientious law-abiding among you out there you would either ask somebody you think might know, or Google ‘crowdfunding and fundraising laws’. You’d get no joy from the latter, and there aren’t many of the former who do know, so here’s the result of me checking the requirements in the ACT for you.

Searching ‘fundraising’ on www.act.gov.au takes one to a page on ‘regulatory compliance’ for ‘public events’. You wouldn’t have thought that your campaign was a ‘public event’, but in the list of activities that may require the bureaucrats’ permission you see ‘Charitable Collections Licence’. Sounds more like you. Plus as you read further on the page you see that ‘fundraising’ in the ACT appears to be about what they call ‘lottery-type activities’ run at an event. Not you, so back to ‘charitable collections’.

A collection is

the soliciting or receiving by a person of money or a benefit if, before or during the soliciting or receiving, the person represents that the purpose of the soliciting or receiving, or that the purpose of an activity or enterprise of which the soliciting or receiving is part, is or includes a charitable purpose.

Through all the ‘soliciting and receiving’ here, it says that you are collecting if you are telling potential donors that you are collecting for a ‘charitable purpose’. That seems to match what you are doing. Or does it? Here’s what the same page says about ‘charitable purpose’:

In general a charitable purpose includes:

–  the relief of poverty or sickness or the needs of the aged;

–  the advancement of education;

–  the advancement of religion; or,

–  purposes beneficial to the community (benevolent, philanthropic and patriotic).

For a purpose to be charitable it must also be for the public benefit and

–  not confer a private advantage;

–  not be harmful to the public; and,

–  also may be extended to include social, mental and spiritual benefits.

I guess you could say that helping your friend is ‘beneficial to the community’, but this would be only in the sense that he is a member of the ‘community’, and that’s a very narrow definition of ‘community’. So probably not what they mean. The next requirement, that your purpose must be ‘for the public benefit’, seems to rule out your campaign – the money is for one person, and one person only.

For extra comfort with your decision, you check the list of exemptions. None apply except for possibly this one:

the soliciting or receiving of money or a benefit by an entity if the proceeds received from collections conducted by the entity is less than $15 000 in a financial year.

You don’t feel much like an ‘entity’, but that doesn’t matter because you plan to set the target at only $10 000. Red tape avoided. (And that includes a report to the Government when the campaign’s finished.)

What if you wanted to raise say $30 000 though? It’s ACT legislation, so perhaps it’s implied that it is the amount collected in the ACT to which the limit applies? Do you have to estimate how much will come from the ACT as opposed to other states and territories. (And maybe overseas.) Better ring the office responsible.

The first person at that office hadn’t heard of crowdfunding, and when she realised that my question couldn’t be answered by her standard responses, passed me to her manager. She too hadn’t heard of crowdfunding, and when she realised that she didn’t have the answer to the ‘public benefit’ question, promised to ring back. On the return call she said that, as a result of discussing the question in the office, it was thought that such campaigns were indeed a ‘charitable collection’. However, if I aimed to raise less than $15 000 in the ACT, I would be exempt. And that an application could be lodged if the campaign, after starting, looked like reaching $15 000 from the ACT. (How, with crowdfunding, would one know?) Oh, and that they would require medical evidence that it was a genuine cause. She had nothing to offer on the ‘public benefit’ question, confusing it with ‘private advantage’.

I’m not convinced, by a long shot, that I’ve got to the definitive answer, so I’m off to read the legislation and draft a written request to the department for a more formal ruling. I’ll leave you to start on the other seven states.