PRODUCER OFFSET FOR DUMMIES

                                    

                                    PRODUCER OFFSET FOR DUMMIES

 

How Australian taxpayers help finance Australian films and why it matters.

 

We all know that the Australian government provides financial assistance to filmmakers. 

 

Few of us understand how much assistance, where the money comes from, and what taxpayers receive in return.

 

One of the most important forms of assistance is the Producer Offset.

 

Despite its bureaucratic name, the principle is simple.

 

The Australian government gives eligible filmmakers a substantial tax rebate on the money they spend making their films.

 

For Australian feature films intended for cinema release, that rebate is generally 40%.

 

Yes, 40%. Quite a lot of money.

 

How does it work?

 

Imagine this: you are producing an Australian feature film with a budget of $5 million.

 

Of that $5 million, you spend $4 million employing Australian actors and technicians, hiring cameras and lighting equipment, renting locations, building sets, editing, recording sound and so on.

 

The government agrees to reimburse you 40% of that $4 million.

 

That's $1.6 million of taxpayers' money.

 

Your $5 million film has effectively cost its financiers $3.4 million, before allowing for financing costs.

 

Sound like a great deal, right?

 

It’s not quite that simple, however.

 

What qualifies for the rebate?

 

The government doesn't necessarily refund 40% of everything you spend.

 

It refunds 40% of what is called Qualifying Australian Production Expenditure, or QAPE.

 

In plain English, this generally means money spent on eligible Australian goods, services and production activities.

 

Pay an Australian cinematographer? Generally qualifies.

 

Hire cameras from an Australian equipment company? Generally qualifies.

 

Employ Australian editors, sound technicians and visual effects artists? Generally qualifies.

 

Pay a Hollywood star millions of dollars for work performed overseas? Generally doesn't qualify.

 

There are exceptions and detailed rules, but that's the basic principle.

 

The rebate is calculated on qualifying expenditure, not necessarily the film's entire budget.

 

When does the producer receive the money?

 

The government doesn't simply hand over $1.6 million when you announce that you're making a film.

 

The rebate is claimed through the tax system after the film has been completed and the necessary certification obtained.

 

The question arises:

“How can a producer use that money to make the film if it won't arrive until after the film is finished?”

The answer:

 

The producer can borrow against the anticipated rebate.

 

A bank or specialist lender advances money on the strength of the expected government payment. When the rebate arrives, the loan is repaid, together with interest and fees.

 

In brief: the government's promise of future money helps finance the film today.

 

Who decides what is an Australian film?

 

Screen Australia administers the Producer Offset certification process.

 

To qualify, a production generally must satisfy a Significant Australian Content test or qualify as an official international co-production.

 

Screen Australia takes into account the film's subject matter, where it is made, who makes it and where the money is spent.

 

A film doesn't necessarily have to tell an Australian story, be set in Australia or feature an entirely Australian cast to qualify for the Offset.

 

This question arises:

 

What qualifies as being an Australian film?

 

Its subject matter? Its writer? Its director? Its actors? Its financiers? Or the nationality of the company that owns it?

 

As far as I can tell there is no simple answer to this question.

 

What about Hollywood films made in Australia?

 

Hollywood productions can also receive substantial assistance from Australian taxpayers, but generally through a different scheme: the Location Offset.

 

This provides eligible productions with a 30% rebate on qualifying Australian expenditure.

 

A Hollywood studio can bring an American story, American stars and an American director to Australia, employ Australian crews and use Australian facilities, and receive a substantial tax incentive.

 

The film doesn't have to be culturally Australian.

 

THE GREAT GATSBY, for instance.

 

The government's rationale is largely economic: jobs, investment, infrastructure and business activity.

 

The Producer Offset, by contrast, is intended to support Australian screen production and Australian creative participation – an important distinction.

 

Is the Producer Offset a good idea?

 

There are powerful arguments in its favour.

 

Making films is expensive and financially risky. The Producer Offset helps Australian producers raise finance, employ skilled workers and compete internationally.

 

Without it, many (most?) Australian films would struggle to get made.

 

There are legitimate questions worth asking and discussing:

 

“Should a film that attracts almost no Australian cinema audience receive the same percentage rebate as one that attracts hundreds of thousands?”

 

“Should the cultural value of a film matter more than its commercial performance?”

 

“Should governments distinguish between films primarily intended to create employment, films intended to win international prizes, and films intended to tell Australian stories to Australian audiences?”

 

 “Should taxpayers be entitled to be provided with information about the public money supporting individual productions?”

 

The Producer Offset helps Australian films get made. Whether those films achieve their cultural, artistic or commercial objectives are questions that will be explored in a little more detail in my next post.