21 April 2009

Keeping you up-to-date with new developments, new resources, information and advice on Australia's Producer Offset incentive and international co-production program.

Feature projects: don’t apply for a Provisional Certificate too early

We’ve noticed that most television projects, including documentaries, tend to apply for Provisional Certificates once a broadcaster is attached, but most feature films apply relatively early in the development phase – often when there is nothing but a screenplay in place. This may not be useful, at least where there are no issues of eligibility in relation to Significant Australian Content.

There is a risk that a Provisional Certificate issued at such an early stage, rather than when necessary to finalise finance, will be based on a ‘first-pass’ budget which bears little relationship to the actual budget. It is also worth noting that the Producer Offset Unit will only re-assess QAPE in special circumstances, and that priority will always be given to ‘new’ applications. Therefore, any re-assessment of QAPE for an existing project may take a number of weeks.

Applying later for provisional certification of a feature also means there’s more likely to be a distribution agreement in place, which makes it possible to demonstrate that the project is intended for commercial cinema release and so would potentially be eligible for the 40% offset.

Screen Australia doesn’t have to be satisfied about whether a project is a feature or not at Provisional Certificate stage. However, if we are satisfied that there’s a bona fide intent to make a theatrical feature film at that stage, we won’t revisit the question of whether the project is in fact a feature film at final certification stage, as long as there has been no change in relevant circumstances.

If the intention to make a feature is not assessed as part of provisional certification, it must be demonstrated for final certification. Evidence of actual distribution may be available which makes this clear. Without such evidence, however, it would be necessary for producers to demonstrate that, throughout principal photography, they had a bona fide intention to distribute the film theatrically.

Our Provisional Certificate application form will shortly be updated to allow applicants to demonstrate that they intend to release their film theatrically. To be satisfied that this intention is bona fide, we would expect to see:

• An executed distribution agreement for theatrical distribution in Australia with a recognised distributor. The agreement must commit the distributor to contributing finance through a distribution guarantee, P&A funds or similar, which must be commensurate with the size and scale of the production.
• A commitment that all cast will be engaged under the relevant performers' contracts with appropriate buy-outs of residual rights consistent with a theatrical picture.
• A finance plan consistent with a feature film.
• A budget reflecting that of a feature film.
• Delivery items consistent with a feature film.

Other information that could be relevant includes:

• The track records of people attached to the project.
• An attached sales agent and any international theatrical pre-sales.

Without a distribution agreement with a reasonable commitment of funds, it is unlikely that Screen Australia will be satisfied at the Provisional Certificate stage that there is a demonstrated bona fide intent to distribute the film theatrically.

Timing of Offset claims: Government acknowledges concerns

On 8 April 2009 the Minister for the Environment, Heritage and the Arts, the Hon Peter Garrett MP, and the Assistant Treasurer and Minister for Competition Policy and Consumer Affairs, the Hon Chris Bowen MP, jointly released the results of the recent statutory review of the Producer Offset. The review examined the impact of the film tax offsets on levels of production by the Australian independent production sector, compared to levels of production by Australian television broadcasters. The review report, discussion paper and submissions are available at www.treasury.gov.au.

Arts Minister Peter Garrett made particular reference in the media release to “concerns with the current timing of payments from the offsets”. Screen Australia is working with Government to identify solutions to the issue, and in this context, we thought we should make the current situation clear:

• The offset is to be claimed in the income tax return for the company issued with a Final Certificate in the year of completion of the film.

• According to the legislation, a film is completed when it is first in a state where it could reasonably be regarded as ready to be distributed, broadcast or exhibited to the general public (there are also specific provisions for television series and seasons of a series).

• Screen Australia considers that a film is in such a state when it is in a form ready for presentation to an audience in a cinema, on disc, on television or for streaming or download, whereby the dialogue and music are married to vision. Generally, the following would be considered a completed film:

  a) If the film is a feature film, completion is the manufacture of a release print.
  b) If the film is made for television broadcast, completion is a fully mixed Digital Betacam or HD with sound and vision or digital equivalent.
  

• Screen Australia may request proof of the completion date at the Final Certificate stage. This may take the form of a tech check or an invoice from the post-production lab.

Please keep this in mind when considering when to submit your claim to the ATO. You must submit your Final Certificate in the applicant company’s tax return for the same financial year as the film is completed.

If you have any queries please contact the Producer Offset Unit on 02 8113 1042.

Updated guidance on Significant Australian Content

At its meeting on 9 April, the Screen Australia Board approved a proposal to clarify the agency’s interpretation of the Significant Australian Content test for the Producer Offset, in particular what is meant by the ‘subject matter of the film’ and the ‘production expenditure incurred in respect of the film’. The proposal was developed after consultation with industry guilds.

A revised version of the document Guidance on Significant Australian Content reflecting this clarification is now available on the Producer Offset section of the website.

Current holders of Provisional Certificates should note that the clarification will not affect final certification, assuming their project proceeds to completion as planned.

Improved application form for Final Certificate

The Application for Final Certificate has been updated as a writeable Word document to make it easier for applicants to fill in. You can download both this application form and the Auditor's Statement Pro-forma - Attachment A from the Final Certification page on the Producer Offset section of the Screen Australia website.

New administrative arrangements

Co-productions: As part of the finalisation of Screen Australia's structure, responsibility for co-productions will no longer co-reside with the Producer Offset. Co-production applications will be assessed by the Legal Group reporting to the General Counsel, Elizabeth Grinston. Richard Cohen should be your first port-of-call on co-pros until further notice.

Call +61 2 8113 5800 and ask for Richard Cohen, or email copros@screenaustralia.gov.au

Producer Offset: The re-named Producer Offset Unit (POU) will still operate semi-autonomously, but will also report to Elizabeth Grinston. The staffing of the POU has now been finalised as:

• Alex Sangston, Senior Manager, Producer Offset
• Michele McDonald, Program Manager, Producer Offset
• Susan Wells, Senior Assessment Officer
• Colleen Champ, Senior Assessment Officer
• Kym Stewart, Producer Offset Coordinator

You may note the new name in that list, Colleen, who joined us on Monday 20 April.

Contact details for the POU remain as they were: +61 2 8113 1042; produceroffsetenquiries@screenaustralia.gov.au

 

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