Filming In Australia: Federal Incentives


Filming In Australia: Federal Incentives, by Jane Corden
(Credit: Australian Film Commission & Moneypenny Services)


Federal Tax Incentives for Film Investment

FINANCIAL CONSIDERATIONS FOR PRODUCTION IN AUSTRALIA

The following information has been provided by Jane Corden of Moneypenny Services.


Federal Tax Incentives for Film Investment

As well as providing direct support for the industry, The Federal Government encourages private investment through tax incentives under the 10BA and 10B of the Income Tax Assessment Act 1936. In addition, the Federal Government has introduced a refundable tax offset for film production in Australia that provides another financial incentive for the producers of large budget films to locate in Australia.

12.5 percent Federal Tax Rebate
The 12.5 per cent refundable tax offset may represent between a 9 per cent and 12.5 per cent cash subsidy on the total budget depending on the extent to which a production shoots and spends money in Australia.

The cash rebate is calculated as 12.5 per cent of a production’s Qualifying Australian Expenditure (QAE) which is defined as production expenditure reasonably attributable to goods, services and property provided/used in Australia.

In order for a production to qualify for the rebate, it must spend at least A$15 million (approx. US$7.5 million) on QAE. Further to this minimum requirement there will be two categories of eligibility:
if the value of QAE is between A$15 million to A$50 million, this will be required to represent a minimum of 70 per cent of the Total Production Expenditure to qualify; or
– if the value of QAE is greater than A$50 million, the production will qualify regardless of the percentage it represents against Total Production Expenditure.

The definition of Total Production Expenditure provides the base against which the 70 per cent activity test will be assessed where QAE is between A$15 million and A$50 million. There are a number of costs that are excluded from the total budget for the purposes of calculating this activity test:

Financing
Development
Copyright Acquisition
General Business overheads
Publicity and Promotion
Fee Deferments

Each of these items are further defined in the legislation, but if any of items 2–5 are incurred in Australia the costs may be factored back into the Total Production Costs. The production may also nominate one person whose remuneration is to be disregarded if it advantages the percentage calculation.

The application for the rebate must be made by an Australian resident company or a foreign entity with a permanent establishment in Australia and an Australian Business Number (ABN) and will be paid directly to the applicant. The application is submitted with a tax return in the year that the film is completed. A provisional certificate may be obtained from the Minister of the Arts (DCITA).

All expenditure should be arranged by the single entity claiming the tax offset.
A company is not entitled to a tax offset if a provisional or final certificate for the film has been issued under 10BA (whether or not the certificate is still in force).

Division 10BA
Division 10BA aims to provide support for equity investment in Australian film and television projects via accelerated tax write-offs. To be eligible, a project must be certified by the Department of Communications and the Arts (DCITA) as a qualifying Australian film. Australian resident investors and corporations who are owners of first copyright of a film may deduct 100 per cent of the capital cost of the qualifying film against their active income in the financial year the investment is made. The project needs to be completed and first used for exploitation within two years from the end of the financial year in which the investment was made. It is important to note that, unlike the UK, there is no limit imposed on a qualifying project’s budget for the investors to utilise the full 100 per cent write off in the first year.

Projects certified as 10BA compliant are also eligible to apply for direct investment from the federal government funding body, the Australian Film Finance Corporation (FFC).

Division 10B
Division 10B also provides support via accelerated tax write-offs for equity investment in film and television projects that are assessed as wholly or substantially made in Australia and allows a wider range of projects to qualify than that provided for under 10BA. However, investors must write off the capital costs over two years, beginning in the financial year in which the project is first exploited or used for income producing purposes. There is no limit imposed on a qualifying project’s budget for the investors to utilise the full tax write-offs over the two applicable years. Projects certified under the provisions of Division 10B are not eligible to apply for funding from the FFC, unlike 10BA certified projects.

Projects that access the tax privileged benefits of Division 10BA and Division 10B, cannot also access the 12.5 per cent federal cash rebate outlined above.

FLICS
The Film Licensed Investment Company (FLIC) scheme was introduced in 1998 and carried a 100 per cent tax concession over the financial years 1998/99 and 1999/2000. Two successful FLIC licensees were appointed in April 1999 – Content Capital Ltd and Macquarie Film Corporation Ltd. Each could raise up to $20 million confessional capital over two financial year.

Links:

Official websites

Australian Film Commission

Websites

International Movie Makers Market (Media Man Australia is a syndicate)

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Filming In Australia: State Based Incentives and Rebates

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