Producer Offset Provisional Certificate

Introduction:

The Producer Offset is a refundable tax offset (rebate) for producers of Australian feature films, television and other eligible projects. The Producer Offset is established under Division 376 of the Income Tax Assessment Act 1997 (the ITAA) and the Producer Offset Rules 2018 (the Rules).

Screen Australia is the film authority responsible for the administration of the Producer Offset. The Producer Offset and Co-production Unit (POCU) is a distinct unit with Screen Australia that manages the program. POCU is subject to tax secrecy provisions and is responsible for ensuring the integrity of the program.

The Producer Offset Guidelines (The Guidelines) are in place to assist you to understand how the Producer Offset is administered by Screen Australia. We recommend you read the Guidelines prior to completing your application.

Changes to the Producer Offset:

On 1 December 2021, federal parliament approved changes to the legislation governing the Producer Offset (Division 376 of the Income Tax Assessment Act 1997), which you can read here. The changes came into force from 1 January 2022 and apply to productions that have commenced or will commence principal photography on or after 1 July 2021.

The Provisional Certificate

Applications for Producer Offset Provisional Certificates can be made at any time.

A provisional certificate does not entitle a project to a final certificate for the film.

A provisional certificate will certify under Rule 17 of the Rules that the conditions set out in subsections 376-65(2) to (6) of the ITAA will be met, or are likely to be met, if the project is completed in accordance with the application. 

In order to claim the Producer Offset, an application must be made for a final certificate (and a final certificate must be issued) once the project is completed. If a provisional certificate is not issued for a project, this does not prevent you applying for a final certificate in relation to that project.

A project must meet the follow eligibility criteria:

• It must have 'significant Australian content' (SAC) or it must be an official co-production.
• It must be an eligible format.
• Its qualifying Australian production expenditure (QAPE) must meet or exceed the relevant threshold.
• The applicant company must be an Australian company, or a foreign company with an Australian permanent residency and an Australian Business Number (ABN).
• The applicant company must carry out, or make arrangements for carrying out, all the activities necessary for making the project.

This application form has been prepared in order to provide Screen Australia with sufficient information to determine whether the above criteria will or will likely be met.

It is important to note that for provisional certification, POCU does not:

• assess an applicant’s estimated QAPE (applicants are encouraged to obtain their own independent QAPE opinion, if required)
• certify that interested-party transactions are budgeted in accordance with the arm’s length principle
• audit the claims in your application.

As a provisional certificate is based solely on information provided in the application, you must notify POCU of any proposed changes within a reasonable time before implementation as your changes may impact your project’s eligibility.

If you have any queries regarding the Provisional QAPE Spreadsheet or any aspects of the Application form please call POCU.

POCU is happy to talk to you pre submitting your application to assist you with collating the requisite information. POCU cannot provide legal or accounting advice.

If  POCU does not receive the requisite information, your application cannot be completed and will be rejected.

Criminal and civil penalties apply to individuals or companies that provide false or misleading statements or information to any Commonwealth agency, including Screen Australia or the Australian Taxation Office. This includes potential liabilities under the Criminal Code Act 1995 and the Taxation Administration Act 1953.  In addition, making a false statement in a Statutory Declaration is an offence punishable by imprisonment. If Screen Australia suspects that a producer offset certificate was fraudulently obtained or obtained through serious misrepresentation (including omissions), it is obligated to report this to the Australian Taxation Office or other relevant authorities. Such a report may trigger a broader investigation into your tax affairs and potential prosecution. Additionally, if Screen Australia determines that a certificate was obtained through fraud or misrepresentation, it may revoke the certificate at any time.  

• Incurred Expenditure

The producer offset operates under tax law and therefore expenditure must be properly incurred on the making on the film in order to be eligible for QAPE. 

The test whether relevant expenditure has been incurred is a legal one, having regard to the circumstances in each case. We recommend you carefully read 2.3 Production expenditure and QAPE from the Guidelines here to ensure you understand how this is administered by Screen Australia.

• Interested Party Transactions

Under section 376-175 of the ITAA, where a transaction is not conducted at arm’s length, the expenditure able to be claimed as QAPE will only be the amount, if any, that would have been incurred if the parties were dealing at arm’s length.

The arm’s-length principle is applied to ensure that expenditure incurred by the applicant for goods and services:

• is commercially reasonable,
• the transactions between the parties have involved real bargaining; and
• the outcome is not inflated compared to the market price.

The scope for determining that a transaction is not conducted at arm’s length is broad, and reference may be had to any connection between the parties (either direct or indirect) and to any other relevant circumstance. Often the reason parties do not transact at arm’s length is because they are interested parties. This means the party has an interest in the receipt of the Producer Offset or an interest with respect to the applicant because of a corporate or business relationship with the applicant.

At the final certificate stage, in order for POCU to be satisfied the arrangements are at arm’s length the onus is on you to provide POCU with substantive evidence in the same way you would provide substantive evidence to the ATO.  

The following documentation is required at the final certificate stage to substantiate all interested party charges. Please note POCU may require additional information:

• • a list of all interested parties involved in the making of the film and a description of the relationship between the parties
  • all agreements between the applicant and interested parties including a detailed breakdown of the work completed
  • the completed worksheet ‘e’ of the final QAPE spreadsheet, providing a breakdown of all interested party expenditure including the role, rates charged, number of weeks and total fee paid. (This must not be a copy of the general ledger, but a summary of this expenditure so we can clearly see the rates charged and length of engagement)
  • in respect of personnel, facilities and supplies – two arm’s length quotes obtained at the time of budgeting for the film and/or evidence of benchmarking against market rates. Any bid or tender documentation should also be provided;
  • change orders for any differences between the original approved bids/agreements and the final costs
  • tax invoices
  • any other relevant information requested by us.
• Please refer to 3.2 Arm’s-length dealings and interest parties of the Guidelines here for further information the treatment of interested party charges.
  
  
• The General Ledger for the film

The general ledger is the key expenditure statement that you are required to submit as part of the final certificate application.

As outlined in Rule 28 of the Rules, the general ledger should include the following details:

• • a description of each budget item
  • the amount of expenditure, including the cost/rate (usually per week)
  • details of each service provider, including the name of the person performing the role and the company (if relevant)
  • the dates the work was performed and goods and services were provided
  • where the work was performed.

Lump sum payments in the GL cannot be assessed.

Applications for a final certificate without a detailed general ledger including the above information, or with an incomplete or incorrect general ledger, cannot be assessed and will be delayed, denied or rejected.

POCU receives a high volume of applications and endeavours to assess applications in a timely manner. To assist POCU in assessing your application as expeditiously as possible, you should double check your paperwork before submitting it to ensure it provides the necessary detail required by POCU.

It is anticipated completing the form will take approximately 30-45 minutes if you have all of the required information. If you start an application and then resume some time later, please ensure any earlier text entered is up-to-date.

 Please ensure you have the following information to hand to enable you to complete the application to the standard POCU requires for assessment:

• The applicant company and parent company details including the ABN
• One page synopsis
• A narrative of the production or additional information addressing anything relating to the production that will assist with the assessment
• Budget and Provisional QAPE spreadsheet
• Details of the development timeline for the film and any chain of title documentation available
• Copy of the Script or treatment
• Finance Plan
• Signed Statutory Declaration form

If you are applying as a feature film and the 40% rebate:

• Marketing and sales plan prepared by the distributor
• Distribution agreement or deal memo.
• Evidence of the distributor's, key cast and crew's track record
• Cast and crew agreements (if available)
• Statement which addresses the criteria outlined in the Guidelines here.
• Any other documents you think are relevant.

Please refer to the Guidelines here for further information regarding the above points.

Resources

Refer to Producer Offset Document Library for:

• Producer Offset Guidelines. Please refer to the relevant version of the guidelines that applies to your project.
• Provisional QAPE spreadsheet

Before you submit your application you will be asked to provide a scan of the transaction statement showing proof of payment of Application Fees. Applications will not be assessed until the application fee has been paid.

Provisional certificate fees are adjusted in July each year to reflect changes in CPI.

For applications received from 1 July 2024 the fees will be (GST inclusive):

• $157.00 – if budget total is less than $1m
• $786.00 – if budget total is $1m to less than $5m
• $1,578.00 – if budget total is $5m to less than $15m
• $3,154.00 – if budget total is $15m to less than $30m
• $5,520.00 – if budget total is $30m or more
• $220.00 – Reassessment fee

These fees must be paid by EFT before sending in an application to Producer Offset and Co-production Unit.

‘Budget’ refers to the total budget of the film (ie including any co-producers’ expenditure for official co-productions).