New screen tax legislation – government gives, and takes away

The Senate report into the new Tax Legislation is mostly a win, with some annoying losses
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We now have the report from the Senate Environment and Communications Legislation Committee about the Treasury Laws Amendment (2021 Measures No. 5) Bill 2021 which finally puts the cards on the table. The television tax offset is confirmed to rise from 20% to 30%, while the 65 episode cap on drama series has been removed.

It will allow the new provisions to be applied retrospectively, back to July 1 2021.

The committee recommends that the government changes the Bill to raise the copyright cap for documentaries to 50% from 30% and test the impact before dropping it again in 18 months time. It wants the government to consult with the PDV sector to find the most valuable formula.

It accepted Screen Australia’s argument that it will take up the space vacated by the tax changes using the $33 million in extra money designed to get the sector through Covid. It urges Screen Australia to get on with this in consultation with the sector.

Read: Senate Enquiry – Crunch time for docos and post-production

But there is a serious downside. With a Coalition majority, it recommends passing the contentious provisions which attack the $500,000 – $1 million drama and documentary sector, overseas shooting by Australian crews, smaller Post, Digital and Visual Effects Companies, and producers expenses claims in productions.

Both the Labour Party and the Greens published minority reports which rejected cuts to the tax provisions and reflected the industry’s own position. They are defending the access of features and documentaries to the offset in the $500,000 – $1 million range.

Claws out between bureaucracies

Documents from the Parliament House bureaucracy are technical works of art, and this report is no exception – it is an excellent summary of the whole debate and its implications. It is remarkably critical of the Department of Infrastructure, Transport, Regional Development and Communications.

The committee notes with disappointment the approach by the Department of Infrastructure, Transport, Regional Development and Communications (the department) to engaging with the inquiry process which could best be described as reluctant.

It accuses the department of faiing to provide detail about the cost and the rationale of changes. Here is a loaded sentence:

In terms of understanding potential unintended consequences for industry stakeholders, the committee also requires an indication of what the cost may be to industry of proposed measures, not just the net cost to the Australian Government.

This is particularly ironic given that the government is putting an extra $75 million into the sector over the next four years. The cuts are trivial in comparison, are targeted to smaller projects mostly built by early career creatives.

Again and again submissions argued that the consequences can be serious. Despite this, said the report,

the department not only failed to make a submission to the inquiry but was poorly prepared for its appearance at the public hearing—being unable to sufficiently explain the bill’s likely impact on the sector or provide the committee with detailed policy costings.

Although the department did eventually provide more information, the report

reiterates disappointment at the lack of professional cooperation which is expected from departments of the Australian Government with an inquiry being conducted by the Australian Senate.

The department argued in favour of removing general business overheads from QAPE, even though SBS pointed out they are a way of recovering research and development investment, which we note are both core objectives in Screen Australia’s Enterprise support strand in its earliest version. Instead,

the department argued that this amendment was designed to more directly support ‘core production expenditure’, rather than overheads such as rent, utilities, office artwork, carpet cleaning and executive bonuses.

Where on earth did they get the evidence for this? Surely no company has applied to put its artwork into QAPE? The idea that executive bonuses are flying around the sector is just weird.

The role of Screen Australia

There is a general assumption through the government side of the argument that reducing support at the bottom end will incentivise the industry to grow. Supporting bigger budgets and projects is seen as better than low budget production.

The department also explicitly named Screen Australia as the agency taking over support for the lower budget sector.

Graeme Mason, CEO of Screen Australia, spoke to the committee on Friday 20 August 2021. He said:

The legislation also includes changes that potentially provide less offset support to some projects. The intention clearly is to incentivise productions that can reach a reasonable audience in the appropriate medium and have the potential to travel.

The department also noted that lower budget productions could also seek financing via other avenues if there was an audience for the proposed content…

Good content will continue to be funded. Screen Australia can and will fill many gaps via direct funding, including for content shot overseas, especially using new moneys the government has given us partly for this very purpose. The government has provided an additional $30 million over next two years to Screen Australia. This funding is to target quality and culturally important Australian screen content, supporting producers to find a pathway to audiences, resulting in positive audience engagement…

Obviously, we’re waiting for the passage of the legislation so we understand clearly the environment we’re working with. But, again, I’d stress that we have been part of pretty much all the projects that have been talked about in the other submissions, so we’re very aware of them all and will be looking how to best assist them going forward.

Read: Forty% film rebate saved by industry lobbying

There is a simple distinction between these two approaches – the marketplace is monetary and an agency is qualitative. There is a fair amount of boundary patrolling here because the qualitative approach is interventionist, and slow, and given to fashion, and sometimes a haven for unpleasantly patronising behaviour. At the same time, a qualitative organisation can offer precise, inventive and nimble approaches. Losing either approach would be a disaster and both will fight for terrain. Fair enough.

The piece missing from Screen Australia’s approach is the expenses issue. Across the board the incomes of producers are being squeezed, while they are essential in building the entire value chain.

The Bill now goes back to the House of Representatives. There could be some changes, as per the report. But this is pretty well the end of a long, tenacious battle.

David Tiley was the Editor of Screenhub from 2005 until he became Content Lead for Film in 2021 with a special interest in policy. He is a writer in screen media with a long career in educational programs, documentary, and government funding, with a side order in script editing. He values curiosity, humour and objectivity in support of Australian visions and the art of storytelling.

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