Studios see red over ‘Rouge’ ruling

Oz gov't reviewing tax law used to bankroll offshore pics

SYDNEY — Local producers fear attempts by the Australian Tax Office to shut down a key film financing avenue is flying a red flag in the face of studios and major independent producers considering lensing Down Under.

The government is reviewing the tax law historically used to bankroll offshore pics, and has promised to deliver a clarification of the law in weeks.

That will be too late for investors of “Moulin Rouge,” whose application for a tax break was rejected last week.

Fox Studios Australia CEO Kim Williams, referring to the principle of “division 10B” financing — and not specifically to the “Moulin Rouge” case — says: “What’s important is that we’re not asking for anything that doesn’t already exist in the (tax) laws. The ATO has chosen to take an aggressive stance against major films. We have sought action from the government to deliver certainty and a competitive context with other nations that offer incentives.”

Arts Minister Peter McGauran refuses comment on the “Moulin Rouge” decision — and on the earlier negative ruling for investors of Warner/Roadshow’s “Red Planet” — but tells Variety he understands producers’ concerns. “Even if the failed applicants under (the division 10B tax provision) deserved to be rejected, it is sending the wrong signals, and the government will address the issue.”

The minister’s office confirms meetings with studio reps have been held in recent weeks.

The ATO decision leaves Fox on the hook for the entire $53 million production budget; investors who had agreed to bankroll the pic did so on condition the film would be granted a 10B ruling.

The deals are structured so that the studio effectively gets a 10% discount on production costs — a handy savings which Fox now will lose on “Moulin Rouge.”

A spokesman for the investors says they are considering a lawsuit to appeal the ruling. “We believe the ATO has deliberately or otherwise misinterpreted the law,” he says, but concedes litigation is not an attractive option because investors, whose money is still being held, will likely just invest in something else rather than wait for the result of a trial.

“The lack of clarity from the government and the ATO is a disincentive for studios and major independents wanting to come here,” says “Moulin Rouge” producer Martin Brown.

Murray Forrest, chairman of AUSFilm, the industry group that promotes Australia as a production destination, worries that the ruling will drive a stake through the heart of Australia as a location for Hollywood filmmakers: “This is the last thing we need. This will turn away production to countries like Canada and Ireland which have incentives and which are making it easier for offshore producers.”

Division 10B has been used to bankroll U.S.-backed films such as “The Matrix” and “Dark City.” Several other films still awaiting ATO rulings include the Jerry Bruckheimer-produced “Down and Under,” Warner Bros.’ “Scooby-Doo” and the WB/Village Roadshow Pictures co-production “Queen of the Damned.”

WB was aiming to use the same funding mechanism for the second and third editions of “The Matrix.”

Execs at WB and Fox in L.A. refuse comment, and Bruckheimer and “Matrix” producer Joel Silver did not return calls.

Don Groves in Sydney contributed to this report.

Popular on Variety

More Film

  • Matthew Modine

    Supporters Back Matthew Modine After Clumsy Joke at SAG-AFTRA Meeting

    More than 100 women, including Ellen Barkin and Allison Janney, have voiced support for Matthew Modine’s campaign for SAG-AFTRA presidency, following a joke at a SAG-AFTRA meeting that some decried as misogynist. With voting set to conclude on Aug. 28, the campaigns have featured vitriolic attacks between supporters of Modine, secretary-treasurer Jane Austin and incumbent [...]

  • Lady Gaga

    Variety Earns 14 Folio: Eddie & Ozzie Award Nominations

    Variety has received 14 Folio: Eddie & Ozzie award nominations for its coverage of the entertainment industry over the past year. The awards gala, which will take place at The Hilton Midtown in New York City on Oct. 30, celebrates publications that have demonstrated impressive investigative journalism, in addition to thoughtful digital and print design. [...]

  • WGA Agents Packaging Fight Placeholder

    Writers Guild Withdraws State Suit Against Agencies, Refiles in Federal Court

    The Writers Guild of America has withdrawn its state court suit against WME, CAA, UTA and ICM Partners alleging packaging fees are illegal and re-filed suit in federal court. The WGA also responded to antitrust claims brought against the guild by the three agencies. Those agency suits alleged that the WGA abused its power in [...]

  • Tim Roth to Receive Honorary Heart

    Tim Roth to Receive Honorary Heart of Sarajevo Award

    British actor Tim Roth is to receive the Honorary Heart of Sarajevo Award in recognition of his “exceptional contribution to the art of film.” The ceremony at the Sarajevo Film Festival will be held on Tuesday. He will hold a masterclass on the same day. His first screen role was the lead in the controversial [...]

  • Isabelle Huppert, receives the Honorary Heart

    Isabelle Huppert on Fateful Encounters, the Nature of Acting and Judging a Good Script

    Celebrated actress Isabelle Huppert, speaking at the Sarajevo Film Festival on Sunday, looked back on her illustrious career in a candid discussion that touched on her acting, the many renowned directors with whom she’s worked, and the importance of dialogue. The festival honored Huppert with its Honorary Heart of Sarajevo award “in recognition of her [...]

  • Inauguracion SANFIC 2019

    15th Sanfic Touts Attendance Rise, Hosts Gael Garcia Bernal, Wagner Moura

    SANTIAGO — Chile’s Santiago International Film Festival (Sanfic) launched its 15th edition Sunday Aug. 18 with three of Latin America’s best-known actors, Gael Garcia Bernal, Wagner Moura (“Narcos”) and Graciela Borges (“La Cienaga”), to which it bestowed career recognition awards. “It’s been 15 years in which we have presented more than 1,400 films,” noted Francisca [...]

  • Sarajevo, Intl. Casting Directors Network Look

    Sarajevo Film Festival and International Casting Directors Network Look to Launch Local Stars

    The Intl. Casting Directors Network (ICDN) and the Sarajevo Film Festival are joining forces to turn the popular Bosnian film fest into a springboard for regional actors looking to launch international careers. After kicking off with a pilot version last year, the initiative expanded to include a series of masterclasses with leading casting directors and [...]

More From Our Brands

Access exclusive content