Commonwealth of Australia Explanatory Memoranda

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EXPORT MARKET DEVELOPMENT GRANTS AMENDMENT BILL 2001

2001





THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA





HOUSE OF REPRESENTATIVES

EXPORT MARKET DEVELOPMENT GRANTS AMENDMENT BILL 2001

SUPPLEMENTARY EXPLANATORY MEMORANDUM





Amendments to be moved on behalf of the Government




(Circulated by authority of the Minister for Trade, the Hon Mark Vaile MP)

ISBN: 0642 458650

EXPORT MARKET DEVELOPMENT GRANTS AMENDMENT BILL 2001

OUTLINE

These amendments add two measures to the Export Market Development Grants Amendment Bill 2001 in order to:

(a) provide for the payment of grants to businesses that promote attendance by foreign residents at conferences, meetings, conventions, exhibitions and sporting, cultural and entertainment events held in Australia on behalf of the holders of these events.

Events promoters – such as professional conference organisers – often carry out “foreign delegate boosting” i.e they promote events to foreign residents on behalf of the event holders, and thus increase the export impact of a wide range of business, academic, sporting and other events. This amendment provides access to the EMDG scheme to these events promoters.

(b) extend the range of export promotional expenses which are eligible under the EMDG Act to include certain expenses incurred in relation to the visits of overseas buyers or potential overseas buyers to Australia.

Businesses based in Australia sometimes invite overseas buyers or potential overseas buyers to travel to Australia in order to view, or to have demonstrated to them, their products. This amendment provides for the travel, accommodation and meal expenses incurred in relation to such visits to be claimed under the EMDG scheme.


FINANCIAL IMPACT

Expenditure under the EMDG Act is capped through annual Appropriation Acts. The extension of the scheme to grant year 2005/06 proposed in the EMDG Amendment Bill 2001 will cost $150m in each of the financial years 2002/2003 until and including 2006/2007. The costs associated with including the events promoters and the inwards visits expenses measures in the scheme will be funded from within these outlays.


ABBREVIATIONS

The following abbreviations are used in this explanatory memorandum:

EXPORT MARKET DEVELOPMENT GRANTS AMENDMENT BILL 2001

NOTES ON AMENDMENTS

(a) Promotion of events

Item 64A This Item describes how the export earnings of events promoters claiming
EMDG grants are measured for the purposes of the Act.

All EMDG applicants except approved bodies and approved trading houses are required to state their export earnings for the purposes of the Act’s $25 million export earnings ceiling and for its exporter performance requirements. Given that events promoters will be able to receive EMDG grants but do not themselves sell to foreign residents in a principal capacity, this Item attributes the export sales made by the person holding the event (referred to for the purposes of this amendment as the “event holder”) to the events promoter.

The event holder’s export earnings to be attributed to the events promoter for the purposes of the Act’s export earnings requirements will include the event admission or entrance fees of foreign residents. They will also include the event holder’s sales of goods or services in connection with the event. Such sales might include accommodation or pre and post event tours, if the sales are made to a foreign resident who attends the event in Australia.

Export earnings that do not relate to the attendance at an Australian event by a foreign resident will not qualify as export earnings for the events promoter. For example, sponsorship paid to the event holder by a foreign corporation would not be eligible export earnings for the events promoter. (See also Item 64F.)

An events promoter’s export earnings for a grant year will be the sum of the eligible earnings received by each of its event holder clients in that grant year.

Item 64B This Item refers to Item 64A.

Item 64C Because there may be a small number of cases where two or more events promoters promote the same event on behalf of the same event holder, the Regulations accompanying the EMDG Act may provide for the allocation of the event’s export earnings between two or more events promoters.

Item 64D This Item refers to Item 64E.

Item 64E The product marketed by the events promoter is not currently an eligible product category under the EMDG Act. This Item defines a new eligible product category for events held in Australia for which there is an events promoter. For cross references to definitions of the terms event, event holder and events promoter refer to Items 64L, 64M and 64N respectively.

The product definition also requires that the events promoter should not be closely related to the event holder. Item 64H explains how Austrade is to form an opinion as to whether events promoters are not closely related to the event holders.

Regulations may be made to prescribe that certain types of events are not eligible. Also, Austrade may determine - if the Australian input to an event is not sufficient to ensure that Australia will derive a significant net benefit from the holding of the event - that the event is not eligible for EMDG support.

There is no change to the current EMDG rules in respect of the eligibility for EMDG of event holders themselves i.e the only events for which the event holders themselves are directly eligible for EMDG support remain those which are specifically for education and training purposes, as well as certain festivals, fairs or similar tourism events which satisfy the requirements of the Regulations accompanying the EMDG Act.

Item 64F Events promoters claiming EMDG grants are able to claim for the same types of expenses and promotional activities as all other applicants, as outlined at s.33 of the current Act. The test for whether an events promoter’s promotional activity is for an approved promotional purpose will be firstly, that it is for promoting an eligible event for which the applicant is an events promoter as defined at Item 64N and secondly, that the expenses are for promoting that event to people outside Australia who are potential event attendees. Expenses of promoting to foreign residents already in Australia will not qualify for grants purposes. Expenses that are for the promotion of any income that is not received in connection with the attendance at an event by a foreign resident will also be ineligible. For example, expenses incurred by an applicant that relate to promoting sponsorship income for an event will not be an eligible.

Item 64G Under the current rules, grant calculations for all applicants only take into account promotional expenses which are not reimbursed or reimbursable to the applicant by any other person. This Item exempts events promoters from this provision to allow them full access to the scheme. It means that an events promoter may be paid a fee by the event holder in return for organising and promoting an event but this fee will not affect the grant payable to the events promoter.

Item 64H Item 64E states that one of the requirements for an event to be eligible is that the events promoter must be not closely related to the event holder. This Item requires the Minister to determine guidelines to be complied with by Austrade in deciding whether or not an events promoter is closely related to an event holder.

Items 64J & Refer to Item 64E
64K

Item 64L This Item defines the type of event for which an events promoter may receive EMDG support. Refer to Item 64E for a more detailed product eligibility definition.

Items 64M & Refer to Item 64E
64N

(b) Visits of overseas buyers

Item 64P This Item amends the Act’s s.33 table of eligible promotional expenses by adding an item 7 to the table to include certain expenses relating to visits to Australia by overseas buyers or potential buyers. Inward buyers expenses will only be allowed to the extent that the buyers’ visits to Australia are made for an approved promotional purpose in terms of section 37 of the Act.

An inward visit would be made for an approved promotional purpose if the buyers or potential buyers came to Australia to evaluate the products of the applicant with a view to purchasing them. Applicants must have products available at the time of any visit or be reasonably capable of supplying products.

Inwards visits expenses will only be allowed if they relate to export promotion. Expenses which relate, for example, to product development or investment activities, or to situations where an overseas buyer has already entered into a contract to buy products and then visits Australia to select products under that contract, will not be allowed.

An applicant’s claimed visit expenses must be reasonable in relation to the extent of promotion to overseas buyers or potential buyers. Holiday visits funded by EMDG applicants will not be eligible.

Where an overseas buyer or potential buyer visits Australia to meet with more than one Australian exporter, an applicant will only be entitled to receive a grant for expenses incurred on promoting its own products.

To be eligible, expenses must be paid to persons not closely related to the applicant. This Item refers to Item 64Q which defines the types of expenses that are allowable expenses under the Act. Expenses of visits involving more than one buyer can be claimed under this category subject to each visitor’s travel being for an approved promotional purpose under the Act.

In order to target this measure to smaller businesses, an applicant will only be able to claim a maximum of $45,000 for inward buyers expenses per grant year. First-time EMDG applicants amalgamating expenses in a grant year and the preceding year will be limited to $45,000 inward buyers expenses for the combined two year period.

Item 64Q This Item defines the allowable expenses for applicants claiming expenses relating to bringing buyers to Australia. This expense category will only apply to inward visits relating to buying. Expenses relating to visits undertaken by, for example, overseas journalists to publicise exporters’ products will not qualify under this category.

Allowable expenses for the item 7 inwards visits expense category of the Act’s section 33 table will include air fares and other transport expenses. Only 65% of any claimed first class air fares amounts will be claimable expenses for this expense category. Claimable expenses will include accommodation and meal expenses relating to the buyer but not to the applicant or the applicant’s employees. These expenses may be incurred both in relation to the buyer’s trip to Australia, and to the buyer’s activities while in Australia. Expenses relating to entertainment of the buyer will not be eligible.

Expenses for each claimed inwards visit will be limited to a maximum of $7,500 per buyer per visit.

Example: An applicant pays for the expenses of a delegation of three buyers to visit its plant and to evaluate its products. The expenses that are eligible under section 34A of the Act relating to the three overseas buyers amount to:

Some applicants may be entitled to receive a grant for expenses related to inwards buyers expenses in other expense categories within the section 33 table of eligible expenses under the scheme’s current rules and will continue to be able to do so. For example, where an applicant is a hotel or resort business, its expenses of supplying accommodation free of charge to buyers or potential overseas buyers will continue to be eligible as free samples expenses (item 4 of the section 33 table).

In such cases – where expenses are claimable under other expense categories listed in the s33 table, such as overseas representation or free samples – they will not be claimable under the overseas buyers visits category. For example, any expenses relating to a buyer who is also an overseas representative must be claimed under item 1A of the section 33 table, rather than under the new item 7 of that table.

(a) Promotion of events

Item 66 This Item adds an extra product category to the present list at Diagram 3 in the Reader’s Guide. The new category is called an event held in Australia marketed to persons outside Australia.

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