SYDNEY — The U.S. studios bluntly told the Australian government last month the tax regime for international films was a huge impediment to shooting Down Under — and last week, the government made amends.
Arts Ministers Richard Alston and Peter McGauran trumpeted a new Canadian-style tax rebate for producers of big-budget productions (films and miniseries, but not TV series) that location in Oz.
The government fast-tracked a review of the situation after Hollywood execs slammed the Australian Tax Office’s decision to deny tax breaks for the Aussie investors in 20th Century Fox’s ‘”Moulin Rouge.” Mutterings were heard that runaway production would decamp to countries like Canada and Ireland, which offer clear-cut concessions.
The government consulted closely with the Motion Picture Assn. and reps of studios including Warner Bros. and Fox on the kind of incentive needed. The outcome is a tax rebate to producers equal to 12.5% of money spent in Australia, effective immediately, so that upcoming films like “The Matrix” sequels will be eligible (though “Moulin Rouge,” having already been produced, is not).
The original “Matrix” was funded under division 10B of the Tax Act, which gave Oz investors a 100% write-off; the ATO denied that deduction to “Moulin Rouge’s” investors, deeming it tax avoidance.
While it’s still not clear whether producers will be able to use division 10B in the future, the ATO has promised to issue a clarification soon.
Regardless of that outcome, entertainment lawyer Ian Robertson welcomes the rebate as a far more attractive option, because it’s “clear, quick and predictable — and you don’t need to have complex negotiations with lots of intermediaries.”
Initial response from Hollywood was very positive. “There’s a sense of relief among those who were committed to shooting in Australia — or who were seeking to do so — that something is in place which is effective immediately and can be easily accessed,” says David Pratt, the L.A.-based commissioner for AusFILM, the industry’s film marketing agency.
Facing an election before the end of this year, the government shrewdly coupled the rebate with a pledge to boost funding for local films and TV drama by A$92.7 million ($48.2 million) over the next five years.
The Australian Film Finance Corp. and industry groups such as the Screen Producers Assn. had argued that Australia’s success in winning offshore production relies on a healthy local industry to provide talent, skills and production infrastructure, which in turn relies on government support.
The FFC, which says its budget in terms of real dollars has been halved since 1988 while the cost of making a feature in Oz has more than doubled, will receive more funding for children’s and adult TV drama.
“An additional A$10.5 million ($5.46 million )from government will translate into about A$25 million ($13 million) worth of film and TV programs because we gear up our money by co-investing with the market, so it is a real win for the local industry,” says FFC CEO Catriona Hughes.
McGauran also announced additional government funding for the Australian Film Commission, pubcaster SBS’ production venture SBS Independent, docu producer Film Australia, the Australian Film, Television and Radio School, and AusFILM.
Indeed, the only potential losers from all this largesse are the lawyers, accountants and brokers who were structuring 10B deals — and the wealthy Oz investors who used them to lower their tax bills.