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Guidelines
Pre-2011 guidelines
2011 Changes to qape

The Australian Government’s 2011/12 Budget Measures included a number of proposals to amend the definitions of Qualifying Australian Production Expenditure (QAPE) outlined in Division 376 of the Income Tax Assessment Act 1997. The changes came into effect following the Royal Assent of the Tax Laws Amendment (2011 Measures No. 7) Act 2011.

The information below provides an overview of the changes. Whether they apply to you depends on when your project went into pre-production and, in the case of Screen Australia–funded projects, when the funding was approved. See Do these guidelines apply to you?

Financing expenditure

Fewer financing-related costs are excluded from QAPE. Broadly speaking, only the actual costs of financing – such as application and administrative fees, interest payments, financiers’ legal fees and in some circumstances executive producer fees – are excluded as financing charges.

As a result, assuming that they satisfy the ‘usual’ QAPE tests, the following may be considered QAPE:

  • completion guarantor fees
  • all production insurances, including E&O Insurance
  • company set up and annual ASIC fees for special purpose vehicles
  • investors’ audit fees
  • QAPE opinion fees
  • production company legal fees associated with financing (eg work on the PIA).

Marketing, publicity and distribution

Previously, marketing and publicity expenses that could be claimed as QAPE were limited to expenses incurred before completion of the film which directly resulted in the creation of material copyright in which is held by an Australian entity.

The Government has extended this provision to include such expenses incurred before the end of the financial year in which the film is completed.

This enables applicants (assuming the expenditure satisfies the ‘usual’ QAPE tests) to claim such expenditure on study guides, posters, trailers and EPK, even if the work takes place after the first version of the film is finished. The cost of copying and distributing these materials is still considered a distribution cost and therefore remains non-QAPE. In addition, Australian unit publicist costs can be claimed as QAPE.

Further, the following costs previously excluded as distribution expenses are now specifically included as QAPE:

  • censorship costs (ie OFLC classification fees)
  • Dolby licences
  • film vaults
  • re-versioning costs that are incurred in Australia before the end of the
  • financial year in which the film was completed (including delivery of them to investors), and
  • freight costs incurred for deliverables.

The above apply so long as the expenditure is incurred in the financial year of the film’s completion or earlier (consistent with the ‘usual’ QAPE rules).

Fees incurred in offsetting a production’s carbon emissions are also specifically  included as QAPE.

Foreign Currency Exchange

The current legislative treatment of foreign currency now only applies to projects with QAPE of $15 million and above. For projects with QAPE under $15 million, the foreign exchange rate as reported in the final cost report provided under the principal financing agreement is used when calculating QAPE.

Non-QAPE

GST

Production expenditure for the Offset’s purposes – and therefore QAPE – is now calculated on a GST-exclusive basis, which means that the GST component of any expenditure claimed as QAPE must be excluded.

Other

Expenditure on wrap parties and other entertainment or on work that takes place outside of Australia and does not meet the ‘normal’ requirements of QAPE remains non-QAPE.