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What is a Mandatory Data Breach Notification for Privacy? – FAQs

What is a Mandatory Data Breach Notification for Privacy? – FAQs

by | Jun 18, 2017 | Law for Online Business, Legal, Privacy

What is a Mandatory Data Breach Notification for Privacy? – FAQs

Do mandatory data breach notifications apply to you?

 

If you are in Australia and collect personal information from clients, customers, suppliers, partners or anyone else for that matter, then maybe they do.  But a compliance perspective, these laws don’t affect you unless you are already required to comply with Australian Privacy law. Which means, you must comply if:

  • you operate a public, private or not for profit organisation with more than $3m turnover per year
  • you are a health service provider (not just doctors, this can include gyms, childcare centres, life coaches and schools), regardless of turnover
  • you are part of a federal government agency
  • you are part of a credit reporting agency
  • your business buys or sells personal information

What are mandatory data breach notifications about?

Data breach falls within Australian privacy laws and is all about cyber security.

The objective of the new law is to give individuals (those who care) confidence that their privacy is being protected. The laws apply regardless of technology, and encourage transparency and accountability.

What does it mean if you have an eligible data breach?

Mandatory data breach notifications only related to personal information. Personal information is defined in the Privacy Act as:

Personal information is –

information or an opinion about an identified individual, or an individual who is reasonably identifiable:

– whether the information or opinion is true or not; and– whether the information or opinion is recorded in a material form or not.

So if your business is hacked and you lose commercial information, that is irrelevant to this law.

The key components of a data breach are:

  • it involves personal information
  • it does not have to be bulk data, personal information about one person may be enough
  • the data has been accessed or disclosed
  • the data has been lost in circumstances where it is likely to be accessed or disclosed (like when NASA employees left a laptop containing access codes to the space station in a cab…)
  • there is a likely risk of serious harm to the people who have had their personal information accessed, disclosed or lost

What does ‘Serious Harm’ mean for a data breach?

Serious harm is a broad concept including physical, psychological, emotional, economic, financial or reputational harm (like when Ashley Madison got hacked and all those people cheating on their partners risked being exposed…)

What is serious harm is likely to be different for each organisation and probably associated with the reason why data has been collected. Customers of a financial institution might risk economic loss, and customers of a medical clinic might risk psychological, emotional or reputation damage.

Think about what is important to your customers, or the people who’s personal information and data you collect.

What should you have in place to handle mandatory data breach notifications?

Not surprisingly, a large proportion of small businesses have adhoc systems in place and no real understanding of what they collect, or how they control their data. This is particularly the case when using third party systems that also store data, like Eventbrite.

IT, management and communications teams will need to work together for data breach notifications.

The top 10 things to consider are:

  1. Every organisation covered by these laws should have a clear understanding of how their data is collected, stored and used and the vulnerabilities of those systems.
  2. Identify ‘who’ in the organisation is responsible for managing data.
  3. Identify the likelihood and consequence of an eligible data breach.
  4. Put in place staff training and security measures to reduce the chance of an eligible data breach.
  5. Understand what ‘serious harm’ could arise if there was a breach.
  6. Work out what would need to happen to avoid ‘serious harm’ and how quickly that could be implemented if there was a breach.
  7. Put in place a recovery plan in case of a breach.
  8. Put in place a communications plan that includes (as a minimum) the communication to those affected, a press release to reduce reputational damage, and the notification to the Privacy Commissioner.
  9. Check the business cyber insurance to see that it covers data breaches and the consequences.
  10. Test a data breach scenario to ensure your business has the ability to manage an eligible data breach.

And lastly…

Remember that data breach laws are technology neutral.

Just because you still operate with a largely paper based system does not mean that this law will not apply.

As someone pointed out to me, most filing cabinets can be unlocked with a paperclip.

How can Onyx Legal help you?

If you need help identifying risks to disclosure of personal information in your business and procedures to manage those risks, or need support developing policies and procedures for managing personal information, then make an appointment to find out how we can help you.

Make an Appointment

Avoid copyright infringement with Facebook Live

Avoid copyright infringement with Facebook Live

by | May 30, 2017 | Copyright, Law for Online Business, Legal

Avoid copyright infringement with Facebook Live

On 3 February 2017, Australian television broadcaster Foxtel televised a highly anticipated boxing match between two well-known boxers, Danny Green and Anthony Mundine. To watch the fight, viewers were required to subscribe through Foxtel and pay a fee to watch the fight live on TV.

copyright fair use in Australia
Australian resident Darren Sharpe was a genuine Foxtel subscriber who paid the required fee to watch the fight live. For those who aren’t exactly sure what live streaming is, it’s the ability to broadcast audio and video as it happens. Any time you want to “go live” you can and anyone watching your posts on Facebook can see you, or whatever it is you are streaming.

Sharpe made the mistake of using his phone to record the fight and stream it live through Facebook Live. While he was live streaming the fight, Sharpe received a call from Foxtel asking him to stop. It was reported that he said he couldn’t, because he has 70,000+ people watching it, which was exactly Foxtel’s point. While Sharpe was allowing a bundle of people to watch the fight for free, Foxtel and all those Sports Bars out there were losing revenue.

When Sharpe refused to stop the streaming, Foxtel immediately suspended his subscription, himself and his followers missing the rest of the fight.

Sharpe did what he did on purpose, and continued after receiving notice of infringement. You should also be aware of the risk of accidental infringement. You might have seen some television shows blur posters, signs, t-shirt branding and other images. It is usually because what has been blurred is protected by copyright and the producer didn’t get permission. It is easy to blur a background image when you have the ability to edit, but not in live streaming. If you infringe someone’s copyright, even accidentally, there can be consequences you didn’t anticipate.

Originally Foxtel claimed that it would pursue legal action against Mr. Sharpe for breaching copyright. Luckily for Mr. Sharpe, that legal action was dropped after he posted a carefully worded public apology on his Facebook page. It is unclear what conversations occurred between Foxtel and Facebook. Given that Mr. Sharpe was able to so easily live stream the fight from his Facebook page, it raises the question –

Should Facebook be responsible for copyright infringement?

Probably not.

One side of the argument is that Facebook should be more responsible for what users post as it has the ability to police the content on its website and act quickly to disable infringing material. On the other hand it is costly and time-consuming to monitor the Facebook page of over 1 billion users. Facebook terms and conditions do require all users to have permission to use the content they upload, whether written, audio, video, or as is now available, through live streaming.

United States legislation requires online service providers, such as Facebook, to take action against copyright infringement. The Digital Millennium Copyright Act (“DCMA”) exempts online service provides from liability for copyright infringement by its users in certain situations. There is no Australian equivalent. The exemption requires online service providers to take down, remove or disable access to infringing material where it is given notice that offending material has been posted on its network. It is clearly working. Facebook’s copyright policy provides rights holders with an easy mechanism to give notice to Facebook that intellectual property have been infringed and have the offending material removed or have a user’s profile disabled.

Facebook Live copyright infringement

Can Facebook be over zealous in taking down infringing content?

Has the DCMA and its safe harbours caused Facebook to be over zealous when taking down material and disabling profiles?

Facebook page administrators are given no warning that the page would be shut down. Anybody with an email address, real or fake, can make a complaint to Facebook without having to validate the claim, effectively giving anyone the ability to shutter any page without proof.

Facebook has suffered criticism in the past (Huffington Post) for shutting down pages where copyright has been alleged, when in fact no copyright infringement existed. The above extract of Facebook terms shows the ‘hands off’ approach taken by the company after Facebook has removed content. What is worse, is when a business page is removed without warning, taking potential customers and contacts with it. In late 2017 a Queensland client had their page removed and received email notification from Facebook referring them to the company that lodged the complaint.

Hello,

We’ve removed or disabled access to the following content that you posted on Facebook because a third party reported that the content infringes or otherwise violates their trademark rights:

Page: ###

Facebook is not in a position to adjudicate disputes between third parties. If you believe that this content should not have been removed from Facebook, you can contact the complaining party directly to resolve your issue:

Notice #: ###

Contact Information
Rights Owner: ## Inc.
Email: ##
Trademark: ##

If an agreement is reached to restore the reported content, please have the complaining party email us with their consent and include the original reference number. We will not be able to restore this content to Facebook unless we receive explicit notice of consent from the complaining party. Please note that the complaining party is not required to respond to your request.

We strongly encourage you to review the content you have posted to Facebook to make sure that you have not posted any other infringing content, as it is our policy to terminate the accounts of repeat infringers when appropriate.

For more information about intellectual property, please visit our Help Center at https://www.facebook.com/help/370657876338359/.

The Facebook Team

In this instance, the rights holder had a trade mark registered in the United States. Intellectual property rights are not granted worldwide. The Queensland company had the same trade mark registration pending in Australia. Facebook appears to be very U.S.- centric in how it reviews rights. The help centre information suggested that an appeal process would be available, but then failed to respond to any communication.

Facebook-content-take-down

Facebook’s aggressive stance on copyright and trade mark infringement may hinder the impact of genuine rights holders. Where someone in the United States and Australia have the same trademark in respect of similar goods, both are equally as enforceable as each other in their respective territories.

Facebook has put the onus back on rights holders to work the details of the infringement out for themselves. Their copyright policy states that users can follow up (by email) with the person who alleges the infringement. It also provides guidance on how to file an appeal if the content was removed due to a take down notice under the DMCA.

Facebook’s policy surrounding two legitimate rights holders is not clear but it appears they are acting cautiously. It may be the case that whoever gets in first to lodge infringement with Facebook may be the winner.

However, in the case of live streaming, Facebook’s response time might simply not be quick enough to protect their interests and alternate avenues will have to be explored.

How can Onyx Legal help you?

If you have any questions about copyright or trade marks, make an appointment to find out how we can help.

Make an Appointment

Australian Standard Contracts Need Updating

Australian Standard Contracts Need Updating

by | May 14, 2017 | Contracts, Law for Online Business, Legal, Service Agreements

Australian Standard Contracts Need Updating

Do your eyes glaze over when presented with a written contract for review? Do your hit the ‘I agree’ button and hope the contract terms are fairly standard? You are not the only one. A survey by The Guardian back in 2011 identified that only about 7% of consumers read terms and conditions before agreeing to them.

If so few people read contracts, then why should you bother to get your Australian Standard Contracts reviewed or updated?

Quick Answer: Update your contracts to avoid $100,000 in penalties and corrective advertising costs –

  • in April 2016 Europcar was ordered to pay $100,000 in penalties to ACCC and spend more in corrective advertising
  • in December 2016 Valve Corporation (online gaming) was ordered to pay penalties of $3 million to ACCC, publish corrective information and implement compliance programs

…Not to mention avoiding having to deal with customer complaints and potentially being sued.

Its also a good opportunity to have your contracts converted to plain English and presented in a language that makes sense to both you, and your customers. I’ve had clients give feedback that their customers have been impressed with how easy it is to understand their contracts. The Virgin brand has done it for years – using real language to help people manage the legal issues instead of exhausting customers with legalese.

But getting back to Unfair Contract Terms….

If you work B2B and use standard form contracts, you’re business now falls within the Australian Consumer Law. If your business customers have less than 20 employees, or the face value of the contract is less than $300,000, then you have to comply. Companies with more employees and higher transaction values are expected to get legal advice on their contracts as a matter of course. Its considered sensible business practice. Interestingly, there are still a lot of businesses who wait until the sh*t hits the fan before they ask for help, and by that stage, its a whole lot more expensive to manage.

So, what are the key areas of your standard contracts that need review?

The courts look at a variety of different things but some of the most frequently considered –

  • whether the terms are negotiable or just ‘take it or leave it’ (click wrap agreements for software are ‘take it or leave it’ contracts)
  • if the contract was prepared by one party before any discussion between the parties
  • who has all or most of the bargaining power
  • the effect of an offending term on the rights of the affected party
  • the actual risk or damage to the contract writer
  • whether the terms of the contract are altered to take into account the specific characteristics of the other party or the particular transaction.

The Europcar case focused on the disproportionate liability to the person hiring a vehicle. In that case Europcar attempted to hold a hirer responsible whether or not they were at fault. Europcar also required the hirer to pay a damage liability fee of $3650 regardless of the actual value of damage, unless the hirer bought extra insurance. So theft of the vehicle could cost a hirer $3650, but so could a dented bumper. The court decided in that case that the contract terms were not reasonably necessary to protect the legitimate interests of Europcar, as well as being disproportionate.

It is also important that standard contract terms are ‘transparent’. This means your contracts need to be –

  • expressed in reasonably plain language
  • legible
  • presented clearly
  • readily available to any party affected before they buy

Some common contract terms that will need review are:

  • clauses that give one party the right to make changes, but not the other – like software agreements that allow the software provider to increase fees automatically
  • clauses that roll over automatically, regardless of the customers wishes
  • clauses that make it hard or impossible for one party to terminate or get out of the agreement
  • clauses that require a buyer to forfeit there deposit, even if you cannot supply the product or service
  • one sided indemnity provisions
  • clauses that disclaim all liability, including negligence
  • clauses that limit the damages a buyer can claim, but don’t limit the damage the seller can claim
  • penalty provisions – like advertising agencies that want a two year agreement with no right to terminate and claim a right to charge whether or not they provide any advertising

If you are one of the 7% of people who read contracts before you agree to the terms, you might have seen some of these provisions. If you haven’t looked at your own business standard contract for a while, NOW is a great time to review and update. We generally recommend that Australian Standard Contract forms, including terms and conditions and privacy on your website or App, should be reviewed and updated at least every two years to ensure your business remains compliant and you avoid the risk of hefting fines and time consuming legal actions.

When reviewing and updating your standard contracts, consider what is most important to your business, where you have the most issues with customers and how you’d like to communicate with your existing customers and leads. We can assist you with a strategy for implementation as well as helping you review, update or refresh your legal contracts.

Book an Appointment now to request a contract review or to update or create your standard contract terms.

How can Onyx Legal help you?

We love writing contracts. Weird, we know. But hey, some people love mountain climbing, so go figure!

Make an Appointment

Legal Issues for Startups

Legal Issues for Startups

by | Apr 29, 2017 | Business Structures, Law for Online Business, Legal, Training

Legal Issues for Startups

The key is to identify the legal issues that put your startup business at risk of irreparable destruction or overwhelming cost, and deal with those issues first.

 

What impacts your startup business most will depend on where you are, and where you want to get to in the immediate future. Prioritise, don’t try and do everything at once.

Someone with an idea they want to develop with have different concerns to someone with a prototype looking for investors, which will be different issues to someone who has an MVP, investors and is looking to build their team.

At Onyx Legal we’ve designed a curriculum for start-ups covering –

MODULE 1 for Startups – Developing an idea

This is all about protecting and valuing your intellectual property (IP).

Too many startups have great ideas and start developing them without understanding how to secure their IP. If you can’t show serious investors that you own the IP, you won’t get investment. Simple as that.

Can you image Microsoft paying $26b for LinkedIn if LinkedIn didn’t own the IP behind their systems? Probably not.

Understanding this legal topic can also help you identify the best tools and strategies for developing your business using other people’s IP.

MODULE 2 for Startups – Business structures

Your business structure is either going to give potential lender’s and investors confidence, or have them running for the hills. What your accountant might recommend for tax minimisation might not be the best structure for attracting an investor. So consider where you want to take your startup and what makes sense for you.

Understanding this legal topic will help you identify structures for investment, growth and diversification. We aim to give you the confidence to really ask questions of your advisers about what is best for your startup and challenge their recommendations to ensure you don’t waste heaps of time or money.

Trust structures might work really well for property investment, but might not be ideal for a tech startup.

MODULE 3 for Startups – Building a team

When you are bootstrapping an enterprise you might not have the ability to pay yourself, let alone anyone else. This legal topic will help you identify options for bringing new skills in to the team without losing your shirt.

Learn about the legal opportunities and pitfalls for employment, employee incentive schemes, sharing equity, contracting, outsourcing and joint ventures.

MODULE 4 for Startups – Protecting your business

Australia is a great part of the world, but probably not always the easiest place in the world to do business. There are loads of rules and you need to have an understanding of what is relevant to your startup or risk having it shut down as soon as you go out and start interacting with customers. There are easy steps you can take to protect your business if you know what questions to ask and where to find the answers.

Risk management is not a scary topic and it isn’t nearly as hard as many risk management systems try to make it. We can help you to work out the key areas of your business that need attention and how to measure and manage that effectively.

Insurance is only one part of risk management and not always the saving grace that some people expect.

MODULE 5 for Startups – Sales and Marketing

What you promise to your customers is no joke, and Apple recently found that out when the ACCC went after them for misleading representations about consumer guarantees. The ACCC can impose fines over $1m on company’s that don’t comply with consumer laws. It’s important to know how your startup will deal with customer enquiries and complaints to avoid having to deal with regulators like the ACCC.

Each module can be delivered as a fast and full on 60 min information only session, webinar (heads up) or a 120 min interactive workshop. Feedback has been that people get more practical understanding from the workshops, but we understand there may be time constraints.

If there was one other thing you’d like to know more about, what would it be? 

Advanced workshops include:

  • A practical guide to copyright, protecting yours and managing cease and desist letters – 90 min
  • What, when, why and how to apply for a trade mark – 60 min
  • Understanding property leases – 60 min

How can Onyx Legal help you?

If you’re starting out on your own, have a team or are even part of an accelerator program and interested in getting some plain English legal training, please use our contact form to make a booking or book an appointment here. We like to start by arranging a chat to work out what fits best for your organisation.

Make an Appointment

Best Business Structure for Online Business

Best Business Structure for Online Business

by | Apr 23, 2017 | Business Structures, Law for Online Business, Legal

Best Business Structure for Online Business

Starting your online business

Starting your online business can be very exciting. One of the many things to think about is your business structure. It’s a great idea to think about these points to help you decide which structure best suits your needs.

  • why you are setting up your business
  • where the money is coming from
  • your long term goals for the business
  • the advantages and disadvantages of different business structures

Common business structures in Australia

It doesn’t matter where you are in the country now, the rules around your business structure will be very consistent across all the states and territories of Australia. The four most common business structures used by small businesses in Australia are:

Sole trader: You operate as the sole person legally responsible for all aspects of the business. As a sole trader you can still employ other people to help you run your business.

Company: A company is not you, it is a separate legal entity owned by its shareholders.

Partnership: Partnerships are formed by agreement rather than registration and are an association of people or entities running a business together. It is different to registering as a company.

Trust: A trust is usually formed by a Deed, but can be ‘bare’ or not documented. There are different laws that apply depending on where you are. The trust holds property or income for the benefit of others and is managed by a trustee.

**IMPORTANT NOTE: A registered business name, or even an unregistered trading name, is not a business structure. It is just a name. That business name might be used by you as a sole trader, your company, a trust you have set up, or a partnership. It is not a legal entity and provides no protection or separation between the person or entity that registers the business name, and the liabilities of the business.

Different Considerations for Business Structures

Things to think about before choosing a business structure for your online business include:

  • Are you making any money yet?
  • Cost to set up and maintain.
  • Do you have personal assets you’d like to protect and keep separate from business liabilities?
  • Are you looking for income sharing opportunities?
  • Do you want to attract outside investors into your business?
  • Would you like to be able to sell all or part of the business in the future?
  • Tax and other duties.
  • Are there future potential tax savings that could affect your choice?
  • The reporting and compliance obligations of the business structure you choose.

Different people have different priorities, so there is no ‘one size fits all’ approach to choosing your business structure. For example, if you are not making any money, your risk is likely to be low and it will be easier to operate as a sole trader. Once you are making more money than you can afford to lose, you might consider setting up a trust or a company to operate your business.

FAQs

Is it better to get my accountant or my lawyer to help me set up my business structure?

In every profession there are people with different levels of skills and experience, so it really depends upon the qualifications and experience of your advisers. Some accountants are great in their area, and some lawyers are too. Know what your goals are and ask your adviser how they can best help you to achieve your goals.

Don’t be afraid to ask if a proposed structure can be simpler! I’ve seen business structures that might have made sense at the time, but become burdensome later on and are impossible to unravel without huge cost.

Can I register a business name if I am a sole trader?

Yes! As a sole trader you can chose to operate under your own name with an ABN, like “Jeanette Jifkins, Solicitor” or you can chose to operate using a business name, like “Onyx Online Law”. You can register the business name against your sole trader ABN and then use that name in your small business. If you do use a business name, you need to register it.

Why should I register a business name for my online business?

It is an offence to operate a business under a trading name (other than your own name) if it is not registered. You can be fined up to around $5,400. You will need an ABN (Australian Business Number) before you can register a business name. Who ever has registered the ABN will be the person or entity behind the business name.

Business name registration is now managed by ASIC. You will need to set up an ASIC Connect account and login before you will be able to find a link to register a business name.

Is my domain name the same as my business name?

Your domain name might be your business name, and it might not. Probably the easiest way to work this out is to think about what name will be on the invoices you business issues. If the name on your invoices is the same as the domain name, then it will also be your business name. You will still need to register your business name, or establish a company with that name, even it is the same as your domain name.

If I have registered a domain name, do I have to register a business name?

Yes. Domain name registration has nothing to do with business name registration. You register a domain name with a domain registrar. You register a business name with ASIC.

Do I have to register my business name if it is the same as my company name?

No. Once you register a company name, no one will be able to register the same business name and you don’t need to register the same name as a business name. They might still be able to register a similar name by adding something like (Australia) to the name.

How do I find out if I can register my business name?

If you are worried about similar business or company names that are already registered, try reserving a company name through ASIC (it costs about $44). When you reserve the name it will be checked and you will be told whether or not you can have it, or if you need to pick another name.

What does ATF mean?

ATF means ‘as trustee for’ and is used when you name the trustee of a trust. The trustee is the legal ‘face’ of the trust. You can have a person or a company as trustee. In legal contracts and on financial documents you will need to use the full legal name of the trust. For example – Small Business Pty Ltd aff Online Business Ventures Trust.

You might also have registered a business name, in which case the full legal title of your online business might be – Small Business Pty Ltd aff Online Business Ventures Trust trading as Software Kings.

Do I have to write ‘trading as’ or ‘t/as’ on my website?

‘t/as’ means ‘trading as’. You do not have to put the full legal name of your business on your website. Provided you have a registered business name and an ABN, that is all you need to use. So from the example above, instead of writing Small Business Pty Ltd aff Online Business Ventures Trust trading as Software Kings ABN 00 123 456 789 you can simply put Software Kings ABN 00 123 456 789 on your website.

It is a lot simpler to simply use your trading name and ABN than your full legal name and avoids the problem of messing it up. People who don’t understand their business structure will sometimes mix up what entity is ‘trading as’ and which one is a trustee.

Can I register more than one business name to my company?

Yes you can. If you want to operate a variety of sub-divisions or small business units within your company, you simply register a business name for each unit using your company ABN. You can then trade with the different trading names, but each trading name will have the same ABN.

Can a trustee company run a business?

When you establish a company for the purpose of being a corporate trustee, that should be the company’s sole purpose. If you also want to trade through a company, you should establish a separate company to do that.

As a corporate trustee, a company is responsible for managing the business or assets of the trust for the benefit of the beneficiaries of that trust. The trustee does not own the trust property, and the trustee can be changed.

How can Onyx Legal help you?

if you would like one of our team to help you make sense of your current business structure, or set up a business structure to suit your needs.

Book an Appointment

Compare Crowdfunding in Australia

Compare Crowdfunding in Australia

by | Dec 13, 2016 | Law for Online Business, Legal, Legal Issues for Small Business

Compare Crowdfunding in Australia

Crowd Funding concept with smartphone on white table

What is crowdfunding?

Crowdfunding is about enabling other people to support your cause or idea by donating money to you.  Some fundraisers offer perks or rewards in exchange for donations, some don’t.

Organisations that have deductible gift recipient (DGR) status can provide tax deductible receipts for donations of over $2, provided that no perk or reward is offered in exchange for that donation.

In Australia there are strict regulations around offering shares or interests in a company as part of a crowdfunding campaign. Only angel investment platforms with financial services licences are able to support this.

What is the risk?

As a donor you are warned against giving money to crowdfunding campaigns in case they are a scam. Statistically, most are not scams but genuine efforts by people or organisations to fund particular projects or ongoing activities.

Australians reported spend $20billion per year on gambling. With those statistics I am constantly surprised that crowdfunding gets such a bad rap. If we could divert even a fraction of gambling revenue into crowdfunding campaigns (same risk) the potential for growth in innovation is huge.

As a fundraiser, your greatest risk is not grabbing the attention of the public and failing to reach your funding goal. One way to mitigate this is to use crowdfunding platforms that permit flexible campaigns where you receive the funding regardless of whether you reach your target or not.

Chose a platform that is currently active; you don’t want to put time and effort into a great campaign only for nothing to happen with it. For example, Cleantechfundr doesn’t appear to have any activity since 2014.

What are the crowdfunding laws in Australia?

Crowdfunding has worked without government interference or regulation up until now, but in late 2015 the Australian Government had before it draft legislation that would regulate ‘crowd-sourced funding’ (because calling it ‘crowdfunding’ like everyone else would be too sensible).

Fundraising in a traditional sense is covered by the Corporations Act and the rules are enforced by the Australian Investments and Securities Commission (ASIC).  If your campaign is seen to be promoting a financial product (shares, insurance, mutual fund) then you will have compliance obligations and crowdfunding is probably not your best bet.

Where you are collecting a donation and offering nothing more than a nominal reward in return, you are unlikely to have to comply with Corporation Act.

The draft legislation (Corporations Amendment (Crowd-sourced Funding) Bill 2015) proposed that ASIC would have regulatory oversight of crowding in Australia where the fundraising results in the people gaining an interest (shares) in a public company. There was nothing in that draft legislation that affected crowdfunding by proprietary companies, associations or individuals. That Bill has now been shelved (2016).

Other laws that affect campaigns are consumer protection laws. When you promote what you plan to do with the money, you have to be accurate in what your telling people. If what you say is later found to be misleading and deceptive you may be liable to pay fines as well as refund money.

You do have to own or have the right to use any content you include in your campaign to avoid infringing intellectual property laws.

Some states of Australia also require organisations (unless exempt) to obtain a fundraising licence if collecting money for a charitable purpose. These states are:

•    Western Australia (any amount)
•    Victoria (>$10,000 per financial year)
•    Tasmania (for individuals & organisations not incorporated in Tasmania)
•    South Australia (any amount)
•    Queensland (any amount)
•    New South Wales (any amount)
•    Australian Capital Territory (>$15,000 per year)

‘Charitable purpose’ doesn’t appear to cover ‘developing a business or business idea’ but it is worth checking with the appropriate state based regulator to work out whether or not you are covered. A useful resource for this is Fundingcentre.com.au for fundraising legislation and regulations for not-for-profits.

How do crowdfunding platforms work?

Crowdfunding platforms usually collect the money before passing it on to the fundraiser, and will only pass it on under certain conditions. Where a fundraiser has listed an all-or-nothing campaign, the people pledging money are often not charged until the campaign has reached the funding goal. With a flexible campaign, funds raised are handed over whether or not the goal is reached.

Crowdfunding platforms don’t take responsibility for the funds raised. If a fundraiser has offered perks or rewards in exchange for money raised and they don’t deliver, donors have to pursue the fundraiser rather than the crowdfunding platform.

Why crowdfunding doesn’t always work in Australia

You can’t enforce a pledge under Australian law. We have a system where there has to be a mutual exchange before a contract can be enforced. The exchange doesn’t have to be for equal value, it just has to occur.

So, if you are crowdfunding in Australia and you want to be able to collect all of the donations pledged to your campaign, you will usually need to offer and provide something in exchange. This is why a lot of campaigns offer promotional material in exchange for donations.

Realistically, the cost of enforcing small donations is likely to be prohibitive, so it is still an exercise in trust in hoping that people will meet the promises they have made. For this reason, platforms that do not have a minimum cap for collection of funds offer a lower risk to crowdfund fundraisers. If you are able to collect the funds as soon as the donor has the impulse to buy, you are less likely to lose collections because people change their mind at a later date.

What can’t I crowdfund?

Each crowdfunding platform sets out different categories of product or service they won’t allow you to start a campaign for. These usually cover things like illegal activities, adult material, tobacco or alcohol products, financial products, optional medical procedures, gambling and so on.

Different types of platforms

Not all crowdfunding platforms support every idea. Some platforms are aimed at creative projects, some social enterprise or charitable projects and a few are designed to connect small investors with start-ups in exchange for an interest in the company. Below is a PDF showing a selection of different types of crowdfunding platforms available in Australia.

There are a few other platforms promoted as crowdfunding or small investment opportunities (like BrickX and Thinkable) that don’t fit the usual crowdfunding framework are not included.

Download your Crowdfunding Australia comparison table here – crowdfundingpdf

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