Oz pic funding study suggests few reforms

SYDNEY – Australian film, TV and docu producers can look forward to stable financing from both government and private sources for the next five years – with a few significant changes to the current regime.

That’s if a new report commissioned by the Dept. of Arts and Communications studying government assistance to the film industry is endorsed by the government. The outcome won’t be known until the May budget.

However, as David Gonski, the merchant banker and chairman of Hoyts Cinemas, worked closely with department officials when preparing his report, which was released late Thursday, it would be surprising if the cabinet did not embrace the bulk of his proposals.

The major surprise is that, contrary to widespread speculation and what appeared to be well-sourced leaks (Daily Variety, Feb. 3), Gonski shied away from urging the closing off of section 51.1 of the Tax Act, a device via which an estimated A$600 million ($474 million) in Australian funds has been channeled into U.S. films.

One source suggested that while Gonski is personally opposed to what he sees as artificial schemes for investing in Hollywood films, closing that loophole would be a dauntingly complex task, given that 51.1 is widely and legitimately used by many Australian companies to claim deductions on expenditure incurred in producing taxable income.

Much to the relief of indie producers who feared the inquiry was an excuse to justify cutting back government financial support, Gonski recommends the current broad “funding envelope” for the film and TV industry continue for at least five years. Among the review’s other main features:

n The current 100% tax deduction for investment in Australian films, which currently attracts minimal funds, should be raised to at least 120%. But the higher tax break would be available only to three film licensed investment companies (FLICS, in effect, studios), to be operational by 1998. He proposes phasing out the current 10B and 10BA tax concessions by June 30. To allay Treasury concerns of a blow-out in private film investment, as happened in the 1980s, when the tax writeoff was as high as 150%, Gonski favors setting a cap on the total coin raised by the FLICS of A$50 million ($39.6 million).

n The tax advantages for limited liability partnerships, which were scrapped in 1992, would be reintroduced to encourage more investment in Australian film and TV. Investors could write off a maximum of 100% of their investment. The report proposes that up to 50 film fundraising issues could be made per year without prospectuses.

n Film Australia, the government’s film, docu and TV production unit, would be drastically scaled down. The 50-year-old institution would continue to administer the government’s National Interest Program, which finances docus and other special-interest programs, but all would be outsourced to indie producers. FA would sell its Lindfield head office and studios, and staff would relocate to the Australian Film Finance Corp.’s offices by July 1998.

n While the report did not advocate a merger between the federal government’s two principal funding bodies, the AFFC and the Australian Film Commission, Gonski said an independent consultant should be appointed to look for savings in common corporate service areas for the film support agencies.

n Government agencies should outsource marketing to the private sector – a curious proposal in view of the AFC’s well-regarded marketing branch headed by Sue Murray.

n Producers would no longer have to negotiate with unions to bring in foreign actors for film and TV projects that are fully funded from offshore.

The report is likely to be generally welcomed by producers who would have more available avenues of financing, plus not having to hassle with the unions about importing actors.

But it will be a bitter pill for Film Australia if it loses its home, its core production function, much of its autonomy and, in all likelihood, many of its staffers.

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