Producer Offset threshold lowered
The Producer Offset eligibility treshold has been reduced from $1m to $500,000 for features and single-episode dramas.
The announcement is part of the Federal Government’s budget, which has brought a $13m direct budget injection package over four years for Screen Australia, and a comprehensive suite of Producer Offset reforms – including the fact that QAPE will now be calculated on a GST-exclusive basis.A number of Screen Australia’s recommendations to last year’s industry review have been implemented, including:
• Replacement of the Producer Offset for low-budget documentaries with a more 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.
The agency has also received funds to re-instate the Australian Bureau of Statistics screen industry survey, last conducted in 2006/2007.
Screen Australia will host sessions in Melbourne (May 18, 5p, ACMI Studio One) and Sydney (May 20, 3:30pm, Dendy Opera Quays) to further explain the budget measures. RSVP is necessary at rsvp@screenaustralia.gov.au
The changes, as explained by Screen Australia, are:
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 (nonfeature)
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:
o All standard production insurances and Completion Guarantees
o 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)
o Additional marketing costs, such as unit publicists and study guides may be
considered QAPE
o Some previously non-QAPE costs, such as censorship and classification costs,
Dolby licenses and film vaults.
o 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.
3/3
• 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.
This is good news for the low-budget Aussie film industry!
I might even be able to get my low budget movie up one day…
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