Qualifying expenditure

The value of the Producer Offset is calculated based on a project’s qualifying Australian production expenditure (QAPE). It’s worth:

• 40 per cent of QAPE incurred on a feature film
  
  
• 20 per cent of QAPE incurred on programs other than feature films (TV series, mini-series or telemovies, short-form animations, non-feature documentary, or direct-to-DVD or web-distributed programming).

What is QAPE?

A project’s production expenditure (PE) is defined as the expenditure incurred in, or that is reasonably attributable to, the making of the film. This includes pre-production activities, shooting of the film, post-production activities and any other activities undertaken to bring the film up to the state where it is ready to be distributed, broadcast or exhibited to the general public. However, production expenditure excludes some expenditures that usually appear in a film's budget, such as financing costs (and associated legals), offshore development expenditure, most marketing and distribution costs, completion bond and some insurances.

A project’s QAPE is a subset of your production expenditure on the film. It’s defined as "the company's production expenditure on the film that is incurred for, or is reasonably attributable to:

• goods and services provided in Australia, for the making of the film;
  
  
• the use of land located in Australia for the making of the film; or
  
  
• the use of goods that are located in Australia at the time they are used in the making of the film".

Where the subject matter of a film reasonably requires a foreign location, expenditure in a foreign country on goods and services supplied by or for Australian residents only during principal photography may be claimed as QAPE.

Some examples of what QAPE is include:

• Australian production company overheads capped at 5% of the Total Budget or $500,000, whichever is the lesser;
  
  
• Insurances: Props, Sets & Wardrobe, Miscellaneous Equipment, Public Liability, Action Vehicles, Travel, Workers' Compensation and other similar insurances;
  
  
• Acquisition of copyright owned by an Australian resident (e.g. music, stock footage) - see below for exclusions in this category;
  
  
• The following development expenditure, but only where the services are provided in Australia:
  - Location surveys (within Australia);
  - Storyboarding & scriptwriting;
  - Research for the film;
  - Casting actors;
  - Developing a budget and a shooting schedule.
  
  
• Depreciation of assets, except for Australian copyright. However, this relates only to the decline in value of the asset, and any balancing adjustments as calculated for income tax purposes directly attributable to its use on the production, is allowable;
  
  
• Production of additional content to be used in a subsequent release of the production, so long as it is incurred prior to completion of the first copy of the film (e.g. DVD special features, additional language overdubs);
  
  
• Residuals pre-brought in an actor's contract and paid out during production or before completion of the production;
  
  
• Expenditure incurred on goods or services on or after 1 July 2007. This means that for any film in production on 1 July 2007, where contracts have been entered into prior to that date, applicants may make a reasonable apportionment of expenses for services provided and goods used on or after 1 July 2007. (Goods and services provided prior to 1 July 2007 are ineligible - see non-eligible items below).  
  
  

Some examples of what is not QAPE include:

• Financing costs, interest, or other returns on amounts invested in the film (including interest on loans, grants and GDIs) and similar expenditure (e.g. brokerage and commission fees paid to financiers, exchange rate hedging facilities, fees associated with applying for Government investment);
  
  
• Expenditure on insurance policies that are related to the financing of the film; FPI insurance; Negative Film Risk; Faulty Stock & Camera & Processing; Extra expense; Completion Guarantee; weather insurance;
  
  
• Expenditure on a completion guarantee or bond;
  
  
• Deferments: payments that become due and are to be recovered from exploitation of the film. However, proceeds from the Producer Offset are excluded from the definition of receipts or earnings of the Film for this purpose (e.g.: if a portion of the producer's fee is deferred until the proceeds of the Producer Offset is received, it is still considered QAPE).
  
  
• Capital cost of acquisition of depreciating assets, excluding Australian copyright (see ATO Legal Database (TR 2007/3) for effective life of depreciating assets in film production);
  
  
• Most marketing expenses;
  
  
• Gratuities, hospitality, entertainment, parties, gifts;
  
  
• Services embodied in the cost of goods delivered to production where the services are predominantly performed outside Australia;
  
  
• Expenditure incurred prior to 1 July 2007.
  
  
• QAPE expenditure on ATL costs that exceed 20% of your total budget. See the At a Glance (PDF) for a detailed explanation.

For more specific inclusions and exclusions, read the PDF documents Producer Offset Guidelines and the At a Glance.