News

Significant Australian Content: Passing the test

TabooSome call it the ‘kangaroos and koalas’ requirement forcing producers to include stereotypical Australian elements in their work; others object that projects with no visible ‘kangaroos and koalas’ should not be eligible for the Producer Offset. Can the Significant Australian Content test be improved to stop this debate?

Beyond productions’ documentary series Taboo was the first project to be denied the Producer Offset based on the incentive’s crucial Significant Australian Content test. It is also the first to be challenged in both the Administrative Appeals Tribunal and Federal Court.

“To date Beyond has incurred over $200,000 in legal fees as a result of appealing the Screen Australia decision to reject our application,” said the company’s managing director Mikael Borglund. “Screen Australia engaged Senior Counsel and a junior barrister, plus they have the use of their in-house legal department. I imagine their costs would be similar.”

This expensive legal fight is taking place over the SAC test, a key differentiator between the 15 percent Location Offset available to international productions shooting in Australia, and the more generous Producer Offset for Australian projects and official co-productions.

The SAC test is based on legislation that existed under the 10BA system, and predates the introduction of the Location Offset. In its current version and under section 376-70 of the Act, “Screen Australia must have regard to the following:
– The subject matter of the film
– The place where the film was made
– The nationalities and places of residence of
those who made the film
– The details of production expenditure, and
– Any other matters that Screen Australia
considers to be relevant.”

The last three years have seen projects such as Knowing, with no immediately obvious Australian content, receive the Offset. The fact that all details about current and former applications and decisions are absolutely confidential due to tax secrecy laws has contributed to a general state of confusion about the SAC test, and the Taboo case has further fueled the debate.

According to Beyond, Taboo was produced by an Australian company, with 57 percent of total production taking place in the country and 86 percent of the budget being spent here. “The key creative personnel are all Australian, and there was a substantial Australian role in developing the series from the earlier program produced by National Geographic Channel.

Borglund told Encore that while the company will benefit financially if it successfully convinces the Federal Court that both Screen Australia and the AAT “got it wrong” and Taboo is therefore entitled to receive a PO final certificate, this fight is about more than money.

“Screen Australia’s decision raises serious issues for the production industry, which need to be resolved. We are concerned that Screen Australia appears to be applying the SAC test in an inconsistent manner when determining whether to grant a final certificate for the Producer Offset,” argues Borglund “Feature films with no Australian on-screen subject matter are qualifying for the Offset, while documentary and factual TV programs are being denied on the basis of a lack of on-screen Australiannes.

“We are also concerned that important parts of Screen Australia’s submission to the AAT in the Taboo case may have misled the AAT as to the operation of the SAC test. The federal agency appeared to take a ‘win at all costs’ approach, which is not what a Government agency should do.”

Borglund sustains that the federal agency misled the AAT by claiming that “particular weight must be given to the subject matter of the program above everything else”.

“This is contrary to SA’s own guidelines on SAC, which prescribe that all five factors must be taken into account as part of a holistic test, and that no single factor is determinative,” he said. “It’s also contrary to what the industry has generally understood over the last three years.

“SA incorrectly submitted to the AAT that the commissioning broadcaster, National Geographic Channel, had the ultimate creative control of the series. In fact, NGC were granted a much more limited right to creative and editorial input and approval. As SA is well aware, any television network which commissions a series retains input and approval over key aspects of the production. This should not have been a relevant factor in determining whether a TV series has SAC.”

The Screen Producers Association of Australia has publicly backed Beyond’s appeal, with executive director Geoff Brown questioning the “inconsistencies” that have emerged in the administration of the Producer Offset – and the SAC test – and saying that the industry wants consistency and transparency. According to reports, SPAA has met with representatives of Arts Minister Simon Crean to express concern over the SAC test.

Encore contacted the office of Mr. Crean; a spokesperson told us that the Minister is “in regular contact with key players in the Australian film industry” and “aware of media reports regarding decisions made by Screen Australia in regard to its administration of the Producer Offset program”.

“These appeal processes show that there are important checks and balances in the current system, but it is also inappropriate for the Minister to comment on these matters while they are before the courts,” said the spokesperson, adding that “each project assessed under the SAC test has its own characteristics and any decision by Screen Australia does not represent an ongoing precedent”.

Borglund believes the Minister should direct the federal agency “to interpret the PO legislation more broadly and consistent with the understandings reached with the production industry in 2007”, as well as establish an independent review or mediation system that doesn’t require the costly process of appealing to the AAT.

BETWEEN A ROCK AND A HARD PLACE

On the other side of this legal boxing ring stands Screen Australia, which has processed 276 final certificates and so far, has only rejected three – one of them being Taboo.

“We have a pretty good track record in getting certificates through and generating production, so the job that has been given to Screen Australia has been a pretty big success really,” said chief operating officer Fiona Cameron. “Of course, those that do get rejected, well, it’s going to hurt. We appreciate that, but we do have the unenviable job of ruling things in or out.”

Cameron said that the SAC test is not a matter of ticking boxes to achieve an outcome: “It’s much more subjective and flexible than that, and flexibility has advantages and disadvantages”. According to Cameron, the upside of the PO falling under tax law is that it’s uncapped and certain.

“At the moment we’re in a very tight economic environment so if this provision wasn’t legislated for, it would perhaps be cut, but being part of tax legislation it is certain, guaranteed and uncapped. There’s a feeling by some that it’s a mysterious process, but the advantages of being under the Tax Act greatly outweigh that.

“Only one application has been rejected on SAC grounds, so it’s not necessarily as big an issue as it is perceived. The general public or stakeholders might look at a project and say ‘How could it possibly be considered Australian?’, but only the applicant and Screen Australia know all the circumstances.”

Cameron finds it ironic that, on one hand, SA has been criticised for making SAC a ‘kangaroos and koalas test’, while other projects such as Baz Luhrmann’s upcoming adaptation of the classic US novel The Great Gatsby, set in Brooklyn New York and scheduled for a Sydney shoot later this year, have been publicly accused of not having enough ‘kangaroos and koalas’.

“I can’t quite resolve that point,” she admitted. “There’s criticism that if you don’t have those kangaroos you won’t get a tick off, and the other criticism is that projects that have no Australian content on screen have no right to get the offset.

“What we’re saying is that the offset is about more than what is on screen. It has to be; otherwise we wouldn’t be making anything other than films about gum trees. The whole point about the Offset is that we attract foreign finance, get our key creatives back here to build bigger, more profitable companies, and have a more sustainable industry.”

WORD OF CERTAINTY

In its submission to the 2010 review, Screen Australia admitted that “the rather broad language in the SAC test” meant it could be open to interpretation and result in uncertainty. It also explained that the agency “is not privy to the decision-making process” used under the 10BA model and, as a result, some applicants had expressed they felt the current process was “stricter” than previous assessments.

The submission recommended the insertion of a new paragraph into the SAC test, formally acknowledging the extent to which Australians contribute to the development and creative control of a project and the participation in recoupment or profits from exploitation of a project.

“We’re trying to avoid a situation where a production that is eligible for the Location Offset can try to get the Producer Offset, go to the AAT and be upheld,” explained Cameron.

“We want the test to be a bit more certain. Legislation could formally acknowledge these points; it would really help a lot in this debate because people wouldn’t be guessing what we were looking for. It would be legislated.”

ADVERTISEMENT

Get the latest media and marketing industry news (and views) direct to your inbox.

Sign up to the free Mumbrella newsletter now.

 

SUBSCRIBE

Sign up to our free daily update to get the latest in media and marketing.