Bills Digest no. 101 2007–08
Export Market Development Grants Amendment Bill
2008
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Contact officer & copyright details
Passage history
Export Market Development Grants
Amendment Bill 2008
Date
introduced: 20
March 2008
House: House of Representatives
Portfolio: Trade
Commencement:
On Royal
Assent
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
The Bill makes a range of
amendments to the Export Market Development Grants Act
1997 (the Act), to generally increase access to grants and
grant money, under the Act.
The Export Market Development Grants Scheme (EMDG Scheme) was
established in 1974 by the Export Market Development Grants Act
1974. The scheme is administered by the Australian Trade
Commission (Austrade) and provides financial incentive in the form
of a taxable grant which represents a partial reimbursement of
promotional expenditure incurred in pursuit of exports. Grants are
based primarily on expenditure incurred by Australian persons or
companies seeking to create or expand exports of their products in
overseas markets.[1]
Reforms to the EMDG Scheme were first announced in December
2007, by the newly appointed Minister for Trade, the Hon Simon
Crean MP. In his address to Diplomatic Corps, the Minister referred
to the newly-elected Government s plans to strengthen and
revitalise our trade facilitation programs, especially the Export
Market Development Grants Scheme as part of an overall effort to
re-ignite export growth.[2]
In his second reading speech introducing the Bill, the Trade
Minister outlined the Government s intention to conduct major
reforms to Australia s trade policies and programs. The announcement
of a review of export policies and programs ( the Mortimer
Review ) by the Minister enables the new Government to act quickly
to generate new policy in regards to the EMDG Scheme. The last
review of the scheme was conducted by Austrade in 2005, with
amendments to implement recommendations from that review made by
the Export Market Development Grants Legislation Amendment Act
2006 along with an announcement from the then Trade Minister,
the Hon Mark Vaile MP, that the Scheme would be extended until the
end of 2010‑11.[3]
Commencing earlier this year, the Mortimer Review
is expected to incorporate a detailed examination of the EMDG
Scheme. Therefore, if the scheme is to continue operation, it seems
likely that there will be further major reforms to the Act.
In his second reading speech, the Minister referred to the
amendments in the Bill as a down payment in the process of
restoring trade policy settings to a more sustainable position and
a much needed boost to exporters by enabling business incurring
eligible promotional expenses to claim grants under more generous
assessment criteria .[4] Overall, while the changes contain no significant major
reforms, they widen the eligibility criteria as well as potentially
increasing payments to successful applicants.
The Explanatory Memorandum states that expenditure under the Act
is set through annual Appropriation Acts. A capping mechanism
ensures that expenditure under the scheme is limited to the amount
appropriated .[5]
Key issues
The major changes to note in the Bill are:
- An increase in the maximum grant by $50,000, allowing
successful applicants to receive up to $200,000
- Increasing the maximum turnover limit of eligible applicants
from $30 million to $50 million, thus allowing more applicants into
the Scheme
- Halving the minimum expenditure threshold of applicants, thus
increasing eligibility, and
- Increasing the limit on grants receivable from 7 to 8, allowing
applicants to access the Scheme for longer.
The Bill does limit accessibility to some extent, in the
restoration of a performance measure for applicants claiming their
third and subsequent EMDG grant. This performance measure was
previously enforced by provisions in earlier versions of the Act
(then known as the export performance test ), but was removed by
the former Government through legislative amendments in the
Export Market Development Grants Legislation Amendment Act
2006.
The Explanatory Memorandum states that those applicants must
elect one of two ways in which they can show that they meet the
performance requirements:
- Option A, which involves a modified method of calculating an
applicant s grant entitlement with details included in a
legislative instrument to be made by the Minister; or
- Option B, which requires applicants to meet an additional
eligibility criterion (called the Australian net
benefit requirements) to receive grants, through the
provision of information and documents as specified in a
legislative instrument to be made by the Minister.[6]
Although this information does not provide a substantial
indication of how applicants will meet the performance
requirements, the Explanatory Memorandum suggests that the
instrument may prescribe factors such as job creation, location of
R&D activities, financial resources and/or economic benefits to
Australia , when determining whether an applicant meets the
Australian net benefit requirement.[7]
In the Explanatory Memorandum to the 2006 Amendment Bill to the
Act, the export performance test was described as follows:
Under the current EMDG Act, applicants are
entitled to receive two EMDG grants regardless of whether they
achieve any export sales. To receive a third and subsequent grants,
applicants other than approved bodies and approved trading houses
must achieve some export sales. This is because the formula for
calculating grants limits the amount payable to a specified
percentage of the applicant s export income.[8]
However, there was little explanation in that Explanatory
Memorandum for the removal of the performance test:
This amendment bill removes all references to
the export performance test from the Act and removes all supporting
references to export earnings from the Act. This will remove some
anomalies and inconsistencies associated with the test.[9]
The re-insertion of a performance measure appears to be a return
to the status quo for the Scheme. However, it is noted that due to
the lack of finer details in this Bill, and the use of statutory
instruments in prescribing the details of the performance measure,
it is currently unclear whether, in practice, the new performance
measures will be substantially different from the former
performance test.
Schedule 1 of the Bill provides general
amendments. Items 1 and 2 amend section 8 of the
Australian Trade Commission Act 1985, which provides the
functions of the CEO of the Australian Trade Commission (Austrade).
The amendment extends the powers of the CEO to enable him or her to
do things required or permitted by legislative instrument.
All other items amend the Export Market Development Grants
Act 1997. A range of amendments to section 7 of the Act
(items 3 - 12) make minor changes to the
eligibility of people and joint ventures to grants under the Act.
This includes an expansion of the income threshold for eligibility
of individuals and trustees, from up to $30 million to up to $50
million. It also enables individuals and trustees to receive up to
8 grants in the EMDG scheme (previously the maximum was 7).
Item 13 inserts new sections 9 and
10 into the Act, to create a new performance measure for
applicants (except approved bodies and approved trading houses,
which are already subject to a separate and additional approval
process under Part 8 of the Act.). If the applicant has received
two grants, and is applying for a third and subsequent grant, the
applicant must elect to use one of two methods to show the CEO that
certain performance requirements are met in order to receive future
grants. This new performance measure is called the
Australian net benefit requirements. The
Act does not elaborate on what the specific performance
requirements are; new section 10 enables the
Minister to prescribe these requirements by legislative
instrument.[10]
Consequential amendments to these new provisions are contained in
items 31 - 34, and 36 - 38.
Section 25 of the Act sets out the eligible
services under the Act those services for which an
applicant is eligible for grants under the EMDG Scheme. The section
currently distinguishes between internal
services (services supplied to non-residents within
Australia) and external services
(services supplied to non-residents outside of Australia). The
latter kind of services enjoys automatic EMDG eligibility, while
only prescribed internal services are eligible under the scheme.
Items 14 - 21 amend the Act to abolish the
differentiation between internal and external services, and insert
a new reference to non-tourism services.
If enacted, the Act will only distinguish between
tourism services (a range of
tourism-related services including passenger transport, food and
beverage services and casino gambling) and non-tourism
services (everything else). The amendments will
provide that while all tourism services are automatically eligible
if supplied to a person who is a non-resident of Australia, all
non-tourism services are eligible unless specifically excluded by
the Regulations.
Current section 29 sets out the requirements for
eligible expenses incurred for a grant.
Among other requirements, the expenses of the applicant must be at
least $15,000 within the grant year (with exceptions for those in
their first grant year) for eligibility. Item 22
reduces this amount of required expenses to $10,000.
Section 33 contains a table of claimable expenses in respect of
eligible promotional activities. Item 23 adds two
new claimable expenses to that table expenses incurred in
registration of intellectual property, and expenses incurred in
obtaining insurance to protect the intellectual property. The
inclusions have been drafted to discourage abuse of the section by
applicants; the Explanatory Memorandum points out that the
claimable expenses will be limited to reasonable expenses incurred
by the applicant in payments to persons that were not closely
related to the applicant, and must be for an approved promotional
purpose .[11]
Items 28 30 make minor amendments to the
formula used for calculating an applicant s provisional grant
amount. Generally, the amendments increase access to reimbursements
of eligible expenses. Most significant of the changes is
item 30, which increases the maximum amount
grantable (for non-trading house applicants) from $150,000 to
$200,000.
Item 35 clarifies that certain bodies
corporate, that might represent:
- More than one industry, or
- Operations at a State/Territory or regional level, as well as
those nationally,
are able to apply to the CEO of Austrade for approval as an
approved body under the Act. This amendment ensures that those
bodies corporate are not unintentionally prohibited from applying,
by virtue of the Ministerial guideline Guidelines for the
approval, variation of approval, and cancellation of approved
bodies (which currently indicates that approved bodies should
be peak bodies, representing the majority of businesses in an
industry.[12]
Items 47 56 make a range of consequential
amendments to some tables and definitions contained in the Act.
Item 57 provides that the amendments in the
Bill (except items 1 and 2) take effect from the beginning of the
grant year commencing 1 July 2008.
PaoYi Tan
13 May 2008
Bills Digest Service
Parliamentary Library
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