Bills Digest No. 136  1998-99 Export Market Development Grants Legislation Amendment Bill 1999


Numerical Index | Alphabetical Index

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
Main Provisions
Endnotes
Contact Officer and Copyright Details

Passage History

Export Market Development Grants Legislation Amendment Bill 1999

Date Introduced: 10 March 1999

House: House of Representatives

Portfolio: Trade

Commencement: Royal Assent

Purpose

The purpose of this Bill is to extend the life of the Export Market Development Grants Scheme (EMDG Scheme) for a further two years, and to make minor changes to the Scheme.

Background

The Export Market Development Grants Scheme (EMDG Scheme) commenced in 1974. The Scheme was established by the Export Market Development Grants Act 1974. That Act was repealed in 1997 by the Export Market Development Grants (Repeal and Consequential Provisions) Act 1997 and replaced with the Export Market Development Grants Act 1997 (the Act).

On 8 December 1997, the Government released its industry statement Investing for Growth. The statement included an extra $300 million to fund the EMDG Scheme for a further two years, which would extend the scheme until 2001-2002 (though the final year for the purpose of eligibility for grants would be 2000-2001).

The EMDG Scheme provides financial assistance primarily to small and medium enterprises as an incentive for them to seek out and develop export markets. The Act currently provides for the scheme to operate for the 1998-1999 grant year but not beyond that. The proposed legislation extends the grant years until the end of the 2000-2001 financial year.

The EMDG Scheme repays part of the promotional expenses which enterprises incur pursuing exports, where the products exported are of substantially Australian origin. The Scheme provides up to 50% reimbursement of eligible expenses where a person has spent over $20,000 per annum on eligible export promotion, although the first $15,000 of expenditure is deducted. First time applicants can combine two years' expenses. A maximum of eight grants of up to $200,000 per grant is available, although additional grants may be claimed for expenses incurred in 'new markets'.(1) The Australian Trade Commission (Austrade) administers the scheme.

To be eligible for assistance, enterprises must have an income of less than $50 million in the grant year with export earnings of less than $25 million for that period.(2) For the purpose of calculating these earnings, related companies are treated as one entity.

First time applicants must satisfy certain requirements. The Government paid $138m in grants to 2,933 recipients in the 1996-97 grant year. The ratio of exports to amount of grants paid was 35:1. All applicants provisionally entitled to more than $50,000 had the full 100 per cent balance of their grant entitlement distributed to them at the end of the financial year.(3)

Senator Peter Cook, the Shadow Minister for Trade, promised during the 1998 Federal election campaign to provide an additional $90 million to the EMDG Scheme over three years and to broaden its scope.

 

Position of significant interest groups/press commentary

One exporter group has suggested that the EMDG Scheme is particularly vital to exporters if a goods and services tax is introduced. In August 1998, the Export Consultants' Association called for the Government to legislate to extend the EMDG Scheme to June 2001 as announced by the Government, stating that if a goods and services tax is introduced with zero rating of exports, this tax measure alone is an insufficient basis for export assistance.(4)

Main Provisions

The Bill is comprised of two Schedules. Schedule 1 amends the Export Market Development Grants Act 1997.

Item 11 repeals sections 20, 21 and 22 of the Act and replaces them with new provisions. The proposed amendment to section 20 removes the obligation for Austrade to administer a 'grants entry test' and replaces it with an obligation for Austrade to decide whether a person meets the 'grants entry requirements'. The proposed amendment to section 21 states that when determining the grants entry requirements, Austrade is limited to requirements that are relevant to the enterprise's prospects of success in relation to the export enterprises for which grants are being sought. A determination of grants entry requirements is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901.

Austrade currently considers eight key areas in relation to grants entry requirements:

  • Planned export activities
  • Achieveability of proposed plans
  • Involvement and ability of management
  • Financial capability
  • Staff numbers and skills
  • Production and supply capacity
  • Lawfulness or practicality of activity, and
  • Realistic export earnings projections.(5)

Item 12 provides that the amendments to sections 20, 21 and 22 will not apply to persons registered under section 19 of the Act before the Bill commences, and that determinations under section 21 in force before the Bill commences continue to have effect.

Item 15 amends section 61 of the Act so that the Minister and Austrade determine some of the things affecting the amount of a grant. Section 61 currently gives power to Austrade to determine some of the factors (such as the initial payment ceiling amount) that are used in the calculation process. This is currently inconsistent with section 68, which provides that the Minister may determine the initial payment ceiling amount.

Item 17 amends section 68 of the Act, which requires the Minister to determine the initial payment ceiling amount and the balance distribution date. The Act currently provides that such a determination is a disallowable instrument. The amendments mean that Ministerial determinations of the initial payment ceiling amount and the balance distribution date are no longer disallowable.

Item 19 amends section 73 of the Act to prevent Austrade from considering an application made more than 5 months after the end of the grant year to which it relates.

Item 26 is a savings provision which allows any guidelines formulated by the Minister for determining whether a person was genuinely carrying on a business in Australia during a grant year which were in force before the proposed legislation commences to continue to have effect. It provides that the disallowance provisions cannot be re-applied to guidelines which continue to be in force because of item 26.

Item 30 is the most important provision in the Bill. Item 30 amends the definition of 'grant year' so that the final grant year commences on 1 July 2000 rather than 1 July 1998. The operation of the EMDG Scheme is therefore extended by 2 years so that the final grant year ends on 30 June 2001.

Item 32 provides that the amendments in Schedule 1 will apply for the purposes of determining eligibility for, and amounts of grants for, the grant year 1 July 1998 to 30 June 1999 and onwards. The exceptions to this are items 18 and 19 which amend the grounds on which Austrade may refuse to consider an application in order to prevent Austrade from considering applications made more than five months after the end of the relevant grant year, and item 30 which amends the definition of grant year so that the scheme is extended a further two years.

Schedule 2 makes minor amendments to other legislation. Item 1 of Schedule 2 amends section 94 of the Australian Trade Commission Act 1985 to permit Austrade to make available the name and address of a person who has received a payment under the EMDG Scheme, as well as the amount of the grant, and the industry to which the grant relates.

Item 2 of Schedule 2 amends section 5 of the Export Market Development Grants (Repeal and Consequential Provisions) Act 1997. That Act currently allows an 'approved body' under the repealed 1974 legislation to continue to exist unless cancelled by Austrade or until the day on which it would have ceased to be in force under the 1974 legislation, if that legislation had not been repealed. This is different to the 1997 Act, which limits the life of an 'approved body' to three years with discretionary extensions. The proposed amendment will ensure that approvals under the 1974 legislation are in line with approvals under the 1997 Act, and have effect for three years after approval, unless cancelled sooner.

Endnotes

  1. Australian Trade Commission, Annual Report, 1997-98, p. 93.

  2. Ibid.

  3. Ibid, pp. 96-97.

  4. Export Consultants' Association, 'Exporters group gives GST cautious reception', 14 August 1998, media statement.

  5. http://www.austrade.gov.au (accessed 16 March 1999).

Contact Officer and Copyright Details

Fiona Walker
19 March 1999
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

IRS staff are available to discuss the paper's contents with Senators and Members
and their staff but not with members of the public.

ISSN 1328-8091
© Commonwealth of Australia 1999

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Published by the Department of the Parliamentary Library, 1999.

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