By Brendan Swift

Screen Australia boss Ruth Harley says the paucity of mid-range feature films being made without the agency’s financial assistance remains an area of concern.

The issue was raised in a Screen Australia forum last night in Adelaide, the first leg of a national tour to discuss concerns ahead of the Government’s industry-wide review later this year.

“As we have declining appropriations; as we put smaller amounts of money into each project in order to keep having a broader slate, this area of $15 to $30 million films is going to really struggle,” Harley said.

Only two projects have been recently produced with budgets around that range: cave diving adventure Sanctum and Chinese-Australian co-production The Last Dragon.

Nonetheless, the Producer Offset has been steadily pumping more money into the industry since its introduction just over two years ago.

The overall slate of Producer Offset projects is likely to cost the government about $170 million for 2008-09 and $100 million for 2009-10. The Offset returns up to 40 per cent of qualifying expenditure for a feature film and 20 per cent for TV and other screen projects.

Screen Australia expects that amount to settle at about $100 million a year, which will be claimed over several years by producers.

“The Producer Offset has absolutely, certainly, increased money into the sector,” Harley said.

Another area of concern raised during discussions centred on the high levels of bureaucracy that documentary producers must contend with. Documentary budgets are generally low, leading to a relatively low rebate.

Screen Australia raised two potential solutions, both related to the current minimum $250,000 minimum hourly expenditure required to trigger the Offset.

It suggested raising the threshold significantly – with Screen Australia making up the funding shortfall directly – or scrapping the threshold altogether.

Difficulties also remain with the timing of the Producer Offset, because the legislation resides within the tax act.

Many producers are now setting up ‘special purpose vehicles’ (SPVs) to house their productions, allowing the Offset to be claimed at any time of year, rather than after the financial year has ended.

While the government is keen for a better solution, concerns remain that creating a separate legislative act for the Producer Offset could lead to a cap or, if the Offset was defined as a ‘grant’, that it could trigger income tax.

Other areas of concern include the uncertainty of the significant Australian content (SAC) test and what is included as qualifying Australian production expenditure (QAPE), tax secrecy laws which prevent Screen Australia from naming productions, and the difficulty of assessing the intent to release a production theatrically.

The possibility of TV productions being ‘shopped’ around for the higher 40 per cent feature film Producer Offset remains an area of concern for Treasury.

Harley said confirming the intent to release a film theatrically would also represent a bigger challenge if the current Producer Offset threshold was lowered to $500,000 (as proposed by the Screen Producers Association of Australia) from its current level of $1 million.

Few low budget features below $1 million are distributed theatrically.

It is understood that the proposed draft terms of reference for the industry review are currently with the office of the Minister for the Environment, Heritage and the Arts, Peter Garrett.

The discussion paper is due to be released in March/April with the final report due to be released in October/November this year.

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