‘Book Week’ did not qualify for the Offset.
Eleven years since the introduction of the Producer Offset (PO), Screen Australia has expressed concern about an increase in applications for feature films that have unreasonably high fees.
A big proportion of those fees is being reinvested in the belief that will meet the criteria for qualifying Australian production expenditure (QAPE).
The legislation limits the amount that can be claimed as QAPE on above-the-line fees to 20 per cent of total film expenditure .
“Alarm bells are ringing at the growth in films that set out on this trajectory having unreasonably high fees,” the agency, which administers the concession via the Producer Offset and Co-production Unit (POCU), warned this week.
“If the budget has been inflated because of the high level of fees due to re-investments the 20 per cent cap becomes less of a guide when assessing arm’s length.
“Reinvestments seem to be frequently appearing at the low end of the budget scale. The PO was not set up to support very low-budget films. Attempts by filmmakers to use reinvestments to get their films above the $500,000 QAPE threshold will be closely examined in terms of whether the related party transactions are market rate.”
In each of the last three years, 25 per cent – 30 per cent of all Australian feature films – excluding documentaries – received the rebate without any other funding from federal and state agencies or film festivals.
Some producers acknowledge the danger of misusing the PO while others say it can be too difficult to qualify, particularly given the need to attach an Australian theatrical distributor.
“The Producer Offset forms the bedrock of any feature film finance plan and allows us to compete with international productions who benefit from lower labour costs and greater access to private finance,” producer Steve Jaggi tells IF. “As an industry we must be mindful of this and ensure that our use of the offset is in the spirit it was created.”
Heath Davis’ films Broke and Book Week, which launched in cinemas today via Bonsai Films, were not eligible as both cost under $500,000. His suspense drama Locusts, which will open next year, was privately financed and the producer Angus Watts intends to apply for the PO. Watts says: “We’ve had plenty of interest from international distributors as it hits the action-suspense genre market but we’ll explore distribution further when it’s at a more mature stage.”
Davis observes: “Often filmmakers get themselves into bad deals because they need a distributor to trigger the Offset. That puts the distributor in control and more often than not, it’s proved disastrous. For the Aussie industry to flourish all elements to work together in favoured nations type of deals. The current mindset needs to change. The filmmakers often get a very raw deal and do a lot of the work for very little reward.”
Writer-director James Di Martino, who made his feature debut this year on horror movie The Faceless Man, says: “I feel the current Offset makes it hard for new talent and first-time directors. To raise those significant funds is no easy ordeal. My crew and I went out, worked our asses off and pulled off a decent film due to our tenacity.”
Producer/writer Peter Koevari’s GP2 Entertainment’s first feature, sci-fi thriller Jiva, directed by Greg Powell, did not qualify.
“Funding bodies are stuck in an age where they are looking less at what makes a film original, globally distributable and on the pulse of worldwide audiences and streamers, and instead focusing more on the composition of the filmmakers themselves, their backgrounds and differences. While that is definitely important, we as a nation are far behind the world in quality content,” Koevari says.
“The offset is all well and good for any production that happens to have the holy grail: A massive budget. Looking at the PO figures, it’s evidence that most do not and it’s mostly the same people, making similar productions.”
Michele McDonald, POCU’s senior manager, acknowledges the common criticism from some filmmakers that they are being forced to sign bad deals with unenthusiastic distributors.
In response, she argues that people other than the filmmaker’s friends, family and associates have to express interest in a project’s theatrical suitability and viability via a commercial deal in order to have the 40 per cent approved.
McDonald does admit she is kept awake at night by the threshold question of what constitutes a feature film. She says it can be problematic if the applicant adopts a cinema-on-demand model or plans to self-distribute the film, which might involve dealing directly with exhibitors.
A four-wall arrangement where the producer pays a flat fee to book a cinema screen is not considered a bona fide release. Questions can also arise around small, boutique distributors with little track record of getting films into cinemas.
Other factors in a film’s favour when feature film certification is being sought include elements such as the presence of arm’s length film investors; a theatrical sales agent or international theatrical sales being in place; cast being engaged on industry-standard feature contracts; and plenty of experience on the creative team in getting projects into cinemas.