Review of the Independent Production Sector backs Producer Offset

17 February, 2011 by Brendan Swift

The government’s review of the independent screen production sector has strongly endorsed the Producer Offset tax rebate.

The long-awaited review found government support has trebled from $136.7 million to $412.1 million in the three years since the Australian Screen Production Incentive was introduced in 2007-08, compared to the previous three years.

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“The Government has committed to working with the sector to respond to the review,” the Minister for the Arts Simon Crean said in a statement. “In particular, I’m keen to hear more from the sector about its strategies for improving audience engagement and attracting additional private financing.”

The review cautiously endorsed some of the issues raised by the industry through almost 80 submissions and acknowledged there are opportunities to improve the effectiveness and efficiency of the offsets.

The Producer Offset delivers a 40 per cent rebate for qualifying feature films and 20 per cent for qualifying television and documentary productions. The Post, Digital and Visual (PDV), and Location rebates, deliver a 15 per cent offset.

“Although it’s still early days, the increase in activity, particularly the production of Australian large budget films, such as Baz Luhrmann’s Australia and George Miller’s Happy Feet 2, and the box office performance of films such as Tomorrow, When the War Began shows the Government support for the sector is having a significant impact,” Mr Crean said.

The report said that total film production expenditure in 2009-10 of $265 million represented an 88 per cent increase above the five year pre-Producer Offset average of $141 million.

However, the Government acknowledged the effectiveness of the Location and PDV offsets were being adversely impacted by the current high value of the Australian dollar.

The Producer Offset has delivered $267 million in taxation rebates from its inception to the end of 2010 while the PDV and Location rebates have delivered an additional $67 million, according to the report.

However, concern remains in the industry that a small number of large productions have accounted for a large proportion of feature film rebates.

A summary of the report’s key findings are:

  • Recommended minor legislative changes to the Significant Australian Content test suggested by Screen Australia but rejected a points test scheme;
  • Rejected making the provisional certificate for the Producer Offset binding;
  • Backed Screen Australia to continue administering the Producer Offset;
  • Noted there is limited data to assess industry claims that the administrative costs of the Offset are potentially prohibitive for low-budget documentaries and that this area may require further monitoring;
  • Found early signs that the Producer Offset is having a positive effect on audience engagement levels with feature films and that Australian drama/serials have also performed strongly;
  • Said reducing the Producer Offset minimum spend thresholds would be at odds with the original legislative intent to encourage larger budget production but would boost online local content ahead of the National Broadband Network implementation. It also said the threshold for short-form animation productions appears too high;
  • Rejected industry arguments that medium-budget films will require some direct government investment, stating that it remains important under the Offset scheme that they demonstrate commercial potential (including international appeal) with little or no direct investment from Screen Australia;
  • Found it is too early to tell whether the Producer Offset is helping television production companies build sustainable businesses but noted there is positive feedback about the system, which is working reasonably well;
  • Found positive signs that the Producer Offset is attracting private investment to feature films;
  • Recommended minor changes to QAPE definitions which may improve administrative efficiency but all claimable expenses must be directly associated with the cost of production;
  • Said the operation of the Offset can be simplified by making definitions to the definition of QAPE but this will require legislative amendment;
  • Strongly endorsed Screen Australia’s current distribution test for feature films;
  • Noted the offsets have played a role in attracting large-budget productions to Australia in 2008-09 and 2009-10 despite the rise in the Australian dollar;
  • Found there may be a role for the industry in voluntarily releasing more information on the uptake of the Offset, such as specific titles, to circumvent tax secrecy legislation;
  • Found Australia’s free trade agreements do not appear to have had a significant impact on levels of Australian content on free-to-air television;
  • Found the Offset has not encouraged TV networks to shift production in-house;
  • Said there may be a case for changing the 65-episode cap to an hour basis to extend access for animation and children’s TV. There is a strong case that the cap is disadvantageous to 15-minute animation series that have less than two series of support from the Offset;
  • Noted it is too early to tell whether the Offset can help create commercially viable series beyond 65 episodes.

The full review can be found at here. Further comments regarding the review can be sent to artsfilminfo@environment.gov.au by Friday, March 11.

 

 

 

 

 

 

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