The producer offset: 40% for a cinema feature, 30% otherwise

The rate, in the Act’s words

The 30% rate came in through the Treasury Laws Amendment (2021 Measures No. 5) Act 2021, which applies it to films commencing principal photography on or after 1 July 2021. Screen Australia’s page gives 20% for television or subscription projects that began principal photography before that date.

The same Act inserted the definitions that decide the 40% question. A feature film includes an animated feature film, but not a film that is not feature-length. A large format film is feature-length at 45 minutes or more; any other film must run more than 60 minutes.

The certificate, and what it needs

The Act calls the certifier the film authority, and says “Film authority means Screen Australia.” Screen Australia must issue a certificate once it is satisfied that the company carried out, or arranged, all the activities necessary for making the film, and that the conditions in s 376-65(2) to (6) are met. Those conditions, in s 376-65(2), are:

• Content or treaty. The film has a significant Australian content, or it “has been made under an arrangement entered into between the Commonwealth or an authority of the Commonwealth and a foreign country or an authority of the foreign country”: an official co-production.
• Audience. It was produced for exhibition in cinemas or by television broadcasting, or for distribution to the public as a video recording.
• Form. It is a feature film, a single episode program, a series, a season of a series, or a short form animated film.
• Not these. It is not, or not to a substantial extent, an advertising program or commercial; a discussion, quiz, game show, panel or variety program or one of a like nature; a film of a public event (other than a documentary); a training film; a computer game; a news or current affairs program; or a reality program (other than a documentary).

Significant Australian content

Section 376-70(1) gives Screen Australia five things to weigh: the film’s subject matter; where it was made; the nationalities and places of residence of the people who took part in making it; the details of its production expenditure; and any other matters Screen Australia considers relevant.

The spending floors

Each kind of film has a minimum QAPE. Some also have a second floor, worked out under s 376-65(7) from the total QAPE and the film’s length in hours.

Item 7A came in with the 2024 Treasury Laws Amendment Act and applies to films whose principal photography, or for an animation its making, commenced on or after 1 July 2024. Its season must have 2 or more episodes made to be shown together under a single title, be produced for television broadcasting or video distribution, and finish principal photography within 12 months (making within 36 months for an animation), pilot episodes aside. A season that fits both items 7 and 7A passes if it meets either.

What counts as QAPE here

Section 376-170 adds seven kinds of expenditure that count for the producer offset only: Australian business overheads; travel to Australia, and to or within other countries for a person whose pay for that work counts under the overseas item; freighting goods within and between countries; the overseas item itself, which is pay to an Australian resident, or purchases from companies or permanent establishments with an ABN, outside Australia during principal photography there, where the subject matter reasonably requires the location; other expenditure incurred in Australia (an independent QAPE opinion for financing, and offsetting carbon emissions from the production); Australian copyright promotional material and unit publicist fees, incurred in Australia; and delivering or distributing the film, Australian classification certificates included.

Limits apply, among them these. General business overheads count only up to the lesser of 5% of total film expenditure and $500,000. Development expenditure, and pay for the principal director, producers and principal cast, stop counting beyond 20% of total film expenditure, though that cap does not apply to a documentary. Expenditure paid for with development assistance from Screen Australia or another body the Act names does not count unless the assistance has been repaid; for a series or season other than a drama series, episodes beyond the one in which the 65th commercial hour is reached do not count; and a purchased service does not count under the overseas item if anyone who is not an Australian resident performs any of it. Expenditure for the Division is worked out excluding GST.

For an official co-production, spending in the partner country that would have counted had it been made in Australia counts towards the floors above; the Act’s note says it is left out when the offset itself is worked out.

Claiming it

A company may have only one of the three film offsets for a film, and the producer offset is out once a location or PDV certificate has issued for it. The company must be resident in Australia, or a foreign resident with an ABN and a permanent establishment here. It claims the offset in its tax return for the income year the film was completed, and that claim is irrevocable.

Screen Australia describes two steps: a provisional certificate, a non-binding view of eligibility, with a processing fee based on the estimated budget; then, once the project is completed and a registered company auditor has audited it, a final certificate stating the QAPE. The ATO credits the offset against any income tax owed and refunds the rest.

A production without Australian content looks instead to the location and PDV offsets, certified by the Arts Minister.