‘Rouge’ investors aren’t done yet

ATO ruling stirs up producers' animosity

SYDNEY — The Australian investors in “Moulin Rouge” are seeing red — and they’re prepared to take their case to court.

Investors first were denied a tax break by the Australian Tax Office, which deemed the funding scheme structured by Australian lawyers and accountants an attempt to avoid tax. Then, they were declared ineligible for a new 12.5% tax rebate paid to producers of big-budget productions filmed Down Under (Variety, Sept. 10-16), because the rebate applies only to films in production on or after Sept. 4, the day the government unveiled the rebate.

Execs at 20th Century Fox, which produced “Moulin Rouge,” are helping the investors, who intend to lodge an objection to the ATO’s ruling. Since the money had been held in an ersatz trust fund pending a tax ruling, the ATO’s denial means investors keep their money but lose their tax break — and Fox has to fully fund the film, costing the studio an estimated 10% of the $53 million production budget.

“We strongly believe the investors are in the right,” says Fox Studios Australia CEO Kim Williams. “The ATO is mistaken in its application of the law.”

If the tax commissioner turns down the investors’ objection, Williams indicated the next step would be an appeal to the federal court.

Warner Bros. and Village Roadshow, whose “Red Planet” also was denied a tax break by the ATO, likely will be watching the case closely, though differing structures in the way the two deals were made may make one ruling inapplicable to the next. For instance, it’s understood WB funded its portion of “The Matrix” budget using the same division of the Income Tax Act that “Moulin Rouge” investors were denied.

“Red Planet” and “Moulin Rouge” notwithstanding, the government’s new 12.5% rebate figures to trigger an upsurge of films from the Warner Bros.-Village Roadshow co-venture.

“We have a commitment from our partners Warner Bros. to shoot a lot more in Australia,” says Village Roadshow managing director Graham Burke.

Burke lauded the package of measures announced by the government, which included funding boosts for the Australian Film Finance Corp. and the Australian Film Commission, as “the shot in the arm which the industry needs.”

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