Tuesday 10 May 2011
Screen Australia has welcomed a $13 million direct budget injection package over four years and a comprehensive suite of Producer Offset reforms announced in tonight’s budget.
The headline changes include a direct injection of funds to Screen Australia for low-budget documentaries and lowering the threshold for Producer Offset eligibility from $1 million to $500,000 for feature films and single-episode dramas.
The Producer Offset has provided over $320 million in Government support to the industry since its introduction in 2007.
Through difficult financial times, the Producer Offset has proven to be a successful stimulus for domestic film and television production. Leading up to the Government’s 2010 Review of the Independent Screen Production Sector, Screen Australia consulted widely with stakeholders to identify opportunities to improve the efficiency and effectiveness of the Producer Offset.
The budget announcement has implemented the vast majority of Screen Australia’s recommendations including:
- Replacement of the Producer Offset for low-budget documentaries with a more accessible and efficient Producer Equity payment administered by Screen Australia, funded through an additional appropriation of $2–3 million per annum
- A reduction in QAPE thresholds, encouraging innovative and entrepreneurial Australian content on multiple platforms
- Converting the 65 episode cap to 65 commercial hours for television, which is of particular benefit to children’s programming
- Exempting documentaries from the 20% above-the-line cap
Providing for a broader range of expenses to be eligible for Qualifying Australian Production Expenditure (QAPE) including production insurances, completion guarantees, legal, audit and company fees, additional publicity and marketing costs, some distribution costs and carbon offsets.
“In what is clearly a tough budget the screen sector should take some comfort from these measures that are designed to invest more money on screen rather than on administration or compliance,” Screen Australia’s Chair, Glen Boreham said.
“In further recognition of the need for informed debate and evidence-based public policy settings the Government has provided Screen Australia with funds to re-instate the Australian Bureau of Statistics (ABS) screen industry survey,” said Mr Boreham.
The survey is a crucial source of information on key business indicators such as income, expenditure, profit margin and employment for the entire Australian audiovisual industry. It has not been conducted since 2006/07, prior to the introduction of the Government’s Australian Screen Media Support Package in 2007/08.
Screen Australia also welcomes the Government’s decision to increase the Post Digital and Visual Effects (PDV) Offset to 30%. This measure will make Australia much more competitive in the PDV marketplace.
More details are set out below. Screen Australia will also explain the budget measures in forums around the country, including:
- Melbourne, 5pm, Wednesday 18 May, ACMI Studio One
- Sydney, 3.30pm, Friday 20 May, Dendy Opera Quays.
RSVP essential as places are limited, to rsvp@screenaustralia.gov.au
IN DETAIL
1. Direct support for low-budget documentaries
An ‘overall’ QAPE threshold for documentary projects of $500,000 – whether for series, seasons of series or single-episodes – will be introduced as part of Producer Offset eligibility. The QAPE threshold of $250,000 per hour will remain.
Documentaries which do not meet the new threshold will be eligible for a Producer Equity payment equal to 20% of the budget, in lieu of receiving the Offset.
Screen Australia will administer the Producer Equity program, which will provide a simple secure means of support for lower-budget projects.
Because Producer Equity would replace the Offset, projects would need to meet a $250,000 per hour budget threshold, have a duration (or episode duration) of a commercial half-hour or more, have significant Australian content, and meet eligibility requirements in Screen Australia’s terms of trade.
The Producer Equity payment will be cashflowed through the production, reducing finance costs for producers. For projects with Screen Australia funding, this means the payment can be incorporated into the normal cashflow schedule; for projects without Screen Australia funding, 50% would be paid on application and 50% on delivery.
Screen Australia will receive an additional appropriation of $2–3m p.a. to pay for the program.
Documentaries which exceed the $500,000 budget limit will remain eligible for the Producer Offset, subject to the statutory criteria.
2. Lowering QAPE thresholds
Currently, feature films and single-episode programs (such as telemovies and direct-to-DVD) must meet or exceed an ‘overall’ QAPE threshold of $1m. Single-episode (non-feature) programs must also meet a QAPE threshold of $800,000 per hour (meaning that a 90 minute telemovie must meet an effective QAPE threshold of $1.2m).
These requirements have the unintended effect of artificially inflating budgets and discouraging entrepreneurial projects at a time when production of innovative Australian drama for multiple platforms should be encouraged.
Both features and single-episode drama projects will now only need to meet a minimum QAPE threshold of $500,000 to qualify for the Offset, with no average hourly threshold.
This will encourage the production of films at more efficient budget levels.
3. QAPE reform
Generally speaking, a number of expenses that are currently excluded from QAPE will now be able to be claimed. The intent is for as much of a project’s budget as possible to be QAPE, making the Offset more certain and more secure and easier to calculate and apply for.
Where the relevant services are provided in Australia, the following costs may now be considered QAPE:
- All standard production insurances and Completion Guarantees
- Costs associated with financing, such as legal fees associated with financing (including preparation of the PIA), production and investor audit fees, company fees set-up and ASIC fees, and medical fees for insurance purposes (actual financing costs, such as interest and application costs will still be excluded from QAPE)
- Additional marketing costs, such as unit publicists and study guides may be considered QAPE
- Some previously non-QAPE costs, such as censorship and classification costs, Dolby licenses and film vaults.
- Carbon offsets
As is currently the case, all QAPE must be incurred prior to the end of the financial year in which the film is completed.
Finally, QAPE will now be calculated on a GST-exclusive basis, correcting an anomaly which had provided accidental benefits for producers. Under current treatment, producers could claim all GST paid as QAPE – even if the GST was subsequently refunded by the ATO. Removing this un-intended benefit will, in fact, reduce the compliance costs for the Offset at final certificate stage as the calculation of the GST paid on QAPE items was a difficult process.
4. Removal of anomalous rules and inefficiencies
A number of aspects of the Producer Offset are in practice inefficient or anomalous in relation to particular kinds of projects. The changes will address these issues:
Currently, projects must convert any expenditure in a foreign currency into Australian dollars using two artificial exchange rates – both an average exchange rate and the rate at the commencement of principal photography. Under the changed rules, for projects claiming QAPE of $15m or less, any expenditure in a foreign currency will be converted to Australian dollars utilising the actual exchange rate that applied when the expenditure was incurred.
Non-feature documentaries are to be exempt from the 20% above the line cap, recognising that the rule has a disproportionate impact in the case of documentaries.
The 65-episode cap on Offset support will be converted to a cap on 65 commercial hours, removing the current inequitable treatment of shorter-form series and seasons of series, particularly animated children series of quarter-hour episodes.
Currently short-form animated drama is an eligible format, but short-form animated documentary is not. This inconsistency will be removed, meaning that all short-form animated projects will now be eligible (providing other eligibility criteria are met).
5. Re-instatement of ABS Survey
In further recognition of the need for informed debate and evidence-based public policy settings the Government has provided Screen Australia with funds to re-instate the Australian Bureau of Statistics (ABS) screen industry survey of the screen production and post-production industry.
The survey is a crucial source of information about key business indicators such as income, expenditure, profit margin and employment for the entire Australian audiovisual industry and has not been conducted since 2006/07 (prior to the introduction of the Government’s Australian Screen Media Support Package in 2007/08).
As the national statistical agency, the ABS is in a unique position to collect this data.
Teri Calder T: 02 8113 5833; M: 0408 440 995
teri.calder@screenaustralia.gov.au
