The Sydney Morning Herald
September 17 1996, Peter Lavelle
Last Month’s Federal Budget held good news for small business exporters:
The Export Market Development Grant scheme survived with minor changes.
The changes won’t affect the majority who benefit from the scheme, say mall
business groups and trade consultants.
Speculation was rife before the Budget that the scheme, which allows eligible
small business exporters a rebate of 50c in the dollar for overseas marketing
costs, would be scrapped. Treasury had criticised the scheme for its complexity
and for being open-ended and hence difficult to budget for
It claimed the real beneficiaries were the consultants advising businesses
how to make the most of the scheme, rather than the businesses themselves.
But strong pressure from the business lobby has seen the scheme retained
in its basic form – though capped and simplified.
Instead of the scheme being open-ended, there is now an annual ceiling of
$150 million on total EMDG payments. Individual grants up to $50,000 will
be paid in full – after this, payments will be made on a pro rata basis according
to how much of the $150 million is left once the first round of grants has
been made.
As 70 per cent of claimants did not seek more than $50,000 anyway, most small
businesses would receive the full amount claimed, the Government said.
Mr Warren Cross, a lawyer specialising in international trade, said the average
claim was about $68,000.
Based on projected claims of $215 million this year, he calculated that those
who claimed more than $50,000 would get about 70 per cent of the balance of
their claim. He said those who claimed the maximum allowable under the scheme,
$200,000, would get about $155,000 for the 1996-97 year.
Access to the scheme has been made easier for small businesses in that the
minimum threshold expenditure required for a grant has been lowered from $30,000
to $20,000. However, it remains the case that only marketing expenses over
$15,000 are eligible for the rebate.
In other words, if you spent $20,000 in overseas marketing costs you are
now eligible for a grant but you would only get a rebate for costs over $15,000
– in other words, $2,500.
Companies with annual turnovers of more than $50 million are now excluded
from the scheme. (Those with annual export earnings of more than $25 million
remain ineligible.)
The range of categories of marketing expenditure eligible for the rebate
has been reduced. Only core marketing costs are now allowed; these include
the cost of overseas representatives, product promotions, trade fairs, literature,
advertising, and marketing consultants.
Rebates are no longer available for the costs of preparing tenders, quotes
and of providing technical information. Capital costs including patent and
trademark costs are now ineligible, as are gifts to potential customers, costs
of export education programs, foreign language course costs and the costs
of bringing overseas buyers to Australia. Air fares may still be claimed but
only for the first two years.
As well, Austrade – which administers the scheme – will be taking a closer
look at the demonstrable capacity of a business to achieve export earnings,
given that a business is allowed two years before it earns export income while
still being eligible for a grant.
“Austrade wants to make sure that the business is fair dinkum about generating
export earnings”, Mr Cross says.
The tourism industry has been brought fully back into the fold as an eligible
industry (after being sidelined for alleged misuse of the scheme by some operators)
and will attract the full 50c (up from 25c) in the dollar rebate.
While most small businesses will be unaffected by the $150 million cap, those
which are applying for a grant of more than $50,000 should be aware the changes
will affect their cash flow, Mr Cross says.
Providing you lodge in July next year for the 1996-97 year’s grant, you’ll
get the first $50,000 in August. But you won’t get the remainder – or know
how much it will be – until after July 1998, as it takes Austrade this long
to receive and assess all the 1996-97 years applications.
The EMDG changes apply to the current 1996-97 financial year. Claims for
the 1995-96 year are unaffected.
While the EMDG scheme lives to fight another day, other related Austrade
schemes have not fared so well. Discontinued are the International Trade Enhancement
Scheme (ITES), the Innovative Agricultural Exporters scheme and the Asian
Fellowship scheme.
Mr. Rob Bastian, chief executive of the Council of Small Business Organisations
of Australia, has welcomed the preservation of the EMDG scheme,
but says the Government should assist smaller operators by abolishing
the eligible expenditure threshold altogether and allowing
rebates for the first $15,000 of marketing expenses.