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2008
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
EXPORT MARKET DEVELOPMENT GRANTS
AMENDMENT BILL 2008
EXPLANATORY MEMORANDUM
(circulated by authority of the Minister for Trade, the Hon Simon Crean MP)
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EXPORT MARKET DEVELOPMENT GRANTS AMENDMENT BILL
2008
OUTLINE
1. This Bill amends the Export Market Development Grants Act 1997 (the Act) to:
· Increase the maximum grant by $50,000 to $200,000
· Allow the expenses of (a) granting, registering or extending rights under
foreign laws in relation to eligible intellectual property, and (b) the expenses of
obtaining insurance against costs likely to be incurred to protect the rights,
where these expenses are incurred for an approved promotional purpose in
terms of the EMDG Act
· Allow approved State /Territory or regional not-for-profit bodies representing
industries, substantial parts of an industry or a number of industries, including
tourism bodies, which promote Australian exporters, to access the scheme
· Lift the maximum turnover limit from $30 million to $50 million
· Cut the minimum threshold of expenditure by $5,000 - to a $10,000 minimum
· Extend the limit on the number of grants from seven to eight annual grants
· Replace the current list of eligible internal and external services with a new
`non-tourism services' category which will provide for all services supplied to
foreign residents whether delivered inside or outside of Australia to be eligible
unless specified in the EMDG Act Regulations
· Introduce a performance measure for applicants that have already received two
grants. Under these requirements, applicants claiming their third and
subsequent EMDG grants (other than approved bodies and approved trading
houses) must make a choice between two options. The two options provide
alternative ways for applicants to show that they meet the performance
requirements.
PURPOSE OF THE BILL
2. Increase the maximum grant by $50,000 to $200,000
Under the current EMDG Act, all applicants except approved trading houses are
entitled to receive up to $150,000 per grant. It also provides for a $250,000 ceiling
for the combined grants payable for members of related companies groups.
3
This amendment Bill increases the maximum grant from $150,000 to $200,000. The
current approved trading house maximum grant limit of $500,000 and the $250,000
ceiling for the combined grants payable for related company group members will not
change.
3. Allow the expenses of (a) granting, registering or extending rights under foreign
laws in relation to eligible intellectual property, and (b) the expenses of obtaining
insurance against costs likely to be incurred to protect the rights, where these
expenses are incurred for an approved promotional purpose in terms of the EMDG
Act
This amendment Bill adds two new eligible expense categories to the range of
eligible expenses (one for the expenses of granting, registering or extending rights
under foreign laws in relation to eligible intellectual property and another for the
expenses of obtaining insurance against costs likely to be incurred to protect the
rights). 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.
4. Allow approved State /Territory or regional not-for-profit bodies representing
industries, substantial parts of an industry or a number of industries, including
tourism bodies, which promote Australian exporters, to access the scheme
The Act currently provides for bodies representing the interests of an industry or of a
substantial part of an industry to be able to apply for approval as an approved body.
This amendment Bill adds bodies which represent more than one industry and
State/Territory or regional bodies to the range of bodies able to apply for approved
body status under the Act.
This amendment to the Act will be followed by an amendment to the Ministerial
guideline Guidelines for the approval, variation of approval, and cancellation of
approved bodies to remove the requirement that approved bodies should be peak
bodies representing the majority of businesses engaged in an industry.
5. Lift the maximum turnover limit from $30 million to $50 million
The Act currently provides for all EMDG applicants except approved bodies,
approved joint ventures and approved trading houses to have annual income of $30
million or less for the grant year. This amendment Bill increases the income ceiling
of applicants from $30 million to $50 million. The Act's current provisions for
approved bodies, approved joint ventures and approved trading houses will not
change.
6. Cut the minimum threshold of expenditure by $5,000 - to a $10,000 minimum
The Act currently provides for a $15,000 minimum expenses threshold. It also
provides for all applicants to receive a minimum grant of $5,000 and for first-time
applicants to be able to combine the expenses incurred in the grant year and the
preceding financial year.
4
This amendment Bill provides that applicants will be eligible for an EMDG grant if
their eligible expenses equal or exceed a $10,000 threshold amount. The current
provision which provides for a $5,000 minimum grant will remain (except for
applicants claiming in grants years three to eight who might have their grant reduced
or denied because of the Bill's proposed performance measure), as will the current
provision enabling first-time applicants to combine two years' expenses. The
$15,000 non-reimbursable amount will also be lowered to $10,000.
7. Extend the limit on the number of grants from seven to eight annual grants
The Act currently provides for applicants (except approved bodies, approved joint
ventures and approved trading houses) to receive up to seven grants. This
amendment Bill provides for applicants currently subject to the seven grant limitation
to now be entitled to receive up to eight grants with no change to the rules for
approved bodies, approved joint ventures and approved trading houses.
8. Replace the current list of eligible internal and external services with a new `non-
tourism services' category which will provide for all services supplied to foreign
residents whether delivered inside or outside of Australia to be eligible unless
specified in the EMDG Act Regulations
The Act currently provides that both external and internal services can be eligible
products. It provides that all external services are eligible for EMDG support except
those specified in the EMDG Regulations but that only those internal services
specified in these Regulations are eligible.
This amendment Bill removes the current distinction between internal and external
services, and provides that all non-tourism services are eligible unless specified in
the EMDG Regulations.
9. Introduce a performance measure for applicants that have already received two
grants. Under these requirements, applicants claiming their third and subsequent
EMDG grants (other than approved bodies and approved trading houses) must make
a choice between two options. The two options provide alternative ways for
applicants to show that they meet the performance requirements.
The EMDG scheme had an export performance test (EPT) for all applicants (other
than approved bodies and approved trading houses) claiming in their third and
subsequent grant years until 2006-07 (2005-06 grant year). This test was removed as
part of the Export Market Development Grants Legislation Amendment Act 2006.
With the removal of the EPT, EMDG applicants are currently entitled to receive up
to seven grants without having to meet any performance requirements.
This Bill provides for a new performance measure for applicants (except approved
bodies and approved trading houses) claiming their third and subsequent EMDG
grants. These applicants must make a choice between two options. These options
provide alternative ways for applicants to show that they meet the performance
requirements. The choice is mandatory and must be made at the time an applicant
applies for a grant.
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Option A involves a modified method of calculating an applicant's grant entitlement
with details included in a legislative instrument to be made by the Minister. Option B
will require applicants to meet an additional eligibility criterion in order to be able to
receive grants, namely the Australian net benefit requirements, with its rules to be
contained in a legislative instrument to be made by the Minister. Applicants choosing
Option B will be required to provide information and documents as specified in a
legislative instrument.
FINANCIAL IMPACT STATEMENT
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.
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EXPORT MARKET DEVELOPMENT GRANTS AMENDMENT BILL
2008
ABBREVIATIONS
The Act Export Market Development Grants Act 1997
Austrade Australian Trade Commission
Austrade Act Australian Trade Commission Act 1985
grant year The year in which expenses are incurred by a grants applicant
CEO Chief Executive Officer of the Australian Trade Commission
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NOTES ON CLAUSES
Clause 1 This Act may be cited as the Export Market Development Grants Amendment
Act 2006.
Clause 2 This Act commences on the day on which it receives Royal Assent.
Clause 3 There is one Schedule amending the Export Market Development Grants Act
1997 and the Australian Trade Commission Act 1985.
SCHEDULE 1--AMENDMENTS
PART 1 - General amendments
Amendment of the Australian Trade Commission Act 1985
Items 1 & 2 Under this Bill's performance measure for applicants (other than approved
bodies and approved trading houses) claiming their third and subsequent
grants, the rules for deciding whether an applicant meets the grants option A
requirements are to be contained in a legislative instrument - refer to Item 29.
This legislative instrument may give the CEO of Austrade powers to exercise
administrative discretion in transferring or adjusting export earnings under the
Act.
Paragraph 8(b) of the Austrade Act currently provides for the CEO of Austrade
to do things required by the Austrade Act or by any other Act to be done by
Austrade. This Item amends the Austrade Act by formally permitting the CEO
of Austrade to perform functions under an instrument made under an Act.
Amendment of the Export Market Development Grants Act 1997
Item 3 The Act currently provides for applicants (except approved bodies, approved
joint ventures and approved trading houses) to receive up to seven grants. This
Item provides for applicants currently subject to the seven grant limitation to
now be entitled to receive up to eight grants with no change to the rules for
approved bodies, approved joint ventures and approved trading houses.
Item 4 The Act currently provides for all EMDG applicants except approved bodies,
approved joint ventures and approved trading houses to have annual income of
$30 million or less for the grant year. This Item increases the income ceiling of
applicants from $30 million to $50 million. The Act's current provisions for
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approved bodies, approved joint ventures and approved trading houses will not
change.
Items 5 - 8 Further to Item 13 and the Bill's new performance measure, these Items amend
the Act's Part 3 eligibility rules so that applicants (other than approved bodies,
approved trading houses and trusts) claiming their third and subsequent grants
that choose grants option B must meet the Australian net benefits requirements
in order to be eligible for a grant.
Item 9 Item 3 refers
Item 10 Item 4 refers
Items 11 - 12 Further to Items 5 - 8, these Items amend the Act's Part 3 eligibility rules so
that persons acting as trustee of a trust estate that choose grants option B must
meet the Australian net benefits requirements in order to be eligible for a grant.
Item 13 This Bill introduces a performance measure for applicants (other than
approved bodies and approved trading houses) claiming their third and
subsequent grants. Under these requirements, applicants must set out a
statement that that they choose either grants option A or grants option B in
relation to a grant year - refer to Item 32. The two options provide alternative
ways for applicants to show that they meet the performance requirements.
This Item provides that the CEO of Austrade must decide whether an applicant
that chooses grants option B meets the Australian net benefit requirements. It
provides for the Minister for Trade to make a legislative instrument to
determine these requirements.
The legislative instrument is likely to be similar in concept to the current
Export Market Development Grants (Significant Net Benefit) Guidelines 2006.
To determine whether an applicant meets the Australian net benefit
requirements, the instrument may require Austrade to take into account issues
such as job creation, location of R & D activities, financial resources and/or
economic benefits to Australia.
The reason for including these assessment requirements in a legislative
instrument is that the relevant assessment criteria may need to be modified
depending on Austrade's experience administering the Bill's performance
measure.
Item 14 The Act currently provides that both external and internal services can be
eligible products. It provides that all external services are eligible for EMDG
support except those specified in the EMDG Regulations but that only those
internal services specified in these Regulations are eligible.
This Item removes the current distinction between internal and external
services, and provides that all non-tourism services are eligible unless specified
in the EMDG Regulations.
Items 15 - 21 Item 14 refers
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Item 22 The Act currently provides for a $15,000 minimum expenses threshold. It also
provides for all applicants to receive a minimum grant of $5,000 and for first-
time applicants to be able to combine the expenses incurred in the grant year
and the preceding financial year.
This amendment Bill provides that applicants will be eligible for an EMDG
grant if their eligible expenses are equal to or exceed a $10,000 threshold
amount. The current provision which provides for a $5,000 minimum grant
will remain (except for applicants claiming in grants years three to eight who
might have their grant reduced or denied because of the Bill's proposed
performance measure), as will the current provision enabling first-time
applicants to combine two years' expenses. The $15,000 non-reimbursable
amount will also be lowered to $10,000 - Item 28 refers.
Item 23 This Item adds two new eligible expense categories to the range of eligible
expenses (one for the expenses of granting, registering or extending rights
under foreign laws in relation to eligible intellectual property and another for
the expenses of obtaining insurance against costs likely to be incurred to
protect the rights). 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.
Items 24 - 26 Item 23 refers
Item 27 Item 29 refers
Item 28 Further to Item 22, the Act currently provides a formula for calculating an
applicants' provisional grant amount. This Bill changes the amount in this
formula from $7,500 to $5,000. Under the Bill, an applicant with, for example,
$50,000 eligible expenditure in a grant year will now have its provisional grant
amount calculated as [50% x $50,000] - $5,000 = $20,000.
This Item will mean that the non-reimbursable amount for all applicants is
lowered from $15,000 to $10,000.
The current provision which provides for a $5,000 minimum grant will remain
(except for applicants claiming in grants years three to eight who might have
their grant reduced or denied because of the Bill's proposed performance
measure), as will the current provision enabling first-time applicants to
combine two years' expenses.
The impact of this measure on grant amounts will be as shown in the following
table, given that the maximum grant is at the same time being increased to
$200,000 - refer Item 30.
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Table: EMDG grants amount - current and proposed
Grant - Grant -
Eligible
current proposed
expenditure
rules rules
$5,000 0 0
$10,000 0 $5,000
$15,000 $5,000 $5,000
$20,000 $5,000 $5,000
$25,000 $5,000 $7,500
$30,000 $7,500 $10,000
$50,000 $17,500 $20,000
$100,000 $42,500 $45,000
$200,000 $92,500 $95,000
$300,000 $142,500 $145,000
$315,000 $150,000 $152,500
$400,000 $150,000 $195,000
$410,000 $150,000 $200,000
$420,000 $150,000 $200,000
Item 29 This Bill provides for a new performance measure for applicants (other than
approved bodies and approved trading houses) claiming their third and
subsequent EMDG grants. These applicants must make a choice between two
options. These options provide alternative ways for applicants to show that
they meet the performance requirements. The choice is mandatory and must be
made at the time an applicant applies for a grant.
Option A involves a modified method of calculating an applicant's grant
entitlement with details to be included in a legislative instrument made by the
Minister. This Item provides for the making of this legislative instrument. This
legislative instrument may confer on the CEO of Austrade a power to make
decisions of an administrative character. These decisions would be limited to
transferring or adjusting export earnings of an applicant under the Act, that is,
to functions that were previously carried out under section 94 and 96 of the Act
before it was amended by the Export Market Development Grants Legislation
Amendment Act 2006.
The legislative instrument will contain the basis for calculating a grant amount
for applicants that choose grants option A. The provisional grant will then be
determined as the lesser of (a) the provisional grant calculated as if the
applicant was not subject to the option A requirements and (b) the amount
determined in accordance with option A (as contained in the legislative
instrument).
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The calculation of grant amounts for applicants choosing grants option A will
be based on the rules for the former export performance test applying under the
EMDG scheme. This test was removed as part of the Export Market
Development Grants Legislation Amendment Act 2006.
The reason for including these assessment requirements in a legislative
instrument is that the assessment criteria may need to be modified depending
on Austrade's experience administering the Bill's performance measure.
Item 30 Under the current EMDG Act, all applicants except approved trading houses
are entitled to receive up to $150,000 per grant. It also provides for a $250,000
ceiling for the combined grants payable for members of related companies
groups.
This Item increases the maximum grant from $150,000 to $200,000. The
current approved trading house maximum grant limit of $500,000 and the
$250,000 ceiling for the combined grants payable for related company group
members will not change.
Item 31 This Item remedies the conflict that arises from the fact that applicants
choosing grants option B will apply for grants before their eligibility under the
Act's revised Part 3 is determined.
Item 32 This Bill provides that all applicants (other than approved bodies and approved
trading houses) claiming their third and subsequent grants must provide a
statement that they choose one of grants option A or grants option B. This
statement must be provided at the time of applying for the grant. An
application will not be taken to be properly made unless such a statement is
received.
In addition, applicants choosing grants option B will be required to provide
information and documents as specified in a legislative instrument if such an
instrument has been made - refer Item 34. To ensure that Austrade can
continue to be able to process most applications in the same financial year in
which they are lodged, this specified information and these documents should
be provided at the time of applying for the grant.
Item 33 This Item provides that Austrade must not consider an application made by a
person subject to the Bill's performance measure that does not provide a
statement that chooses one of grants option A or grants option B. In addition,
the Item provides that Austrade must not consider an application made by an
applicant that chooses grant option B where that applicant has not provided the
information and documents required to be provided as specified in a legislative
instrument if such an instrument has been made - refer to Items 32 and 34.
Item 34 Further to Item 32, this Item provides that the CEO of Austrade may make an
instrument specifying information and documents to be provided by applicants
that are subject to the Bill's performance measure and that choose grants option
B.
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The reason for including the information requirements in an Austrade
determination is that the required information may change depending on
Austrade's experience administering the Bill's performance measure. It is
expected that the information requirements will specify that applicants must
provide their latest audited financial statements and other documentation to
show that Australia derives net economic benefits from their export activities.
Item 35 The Act currently provides for bodies representing the interests of an industry
or of a substantial part of an industry to be able to apply for approval as an
approved body. The current Ministerial guideline Guidelines for the approval,
variation of approval, and cancellation of approved bodies provides that
approved bodies should be peak bodies representing the majority of businesses
engaged in an industry. This means that State and regional industry
associations including tourism promotion bodies are not currently able to
qualify as EMDG approved bodies.
This Item adds bodies which represent more than one industry and
State/Territory or regional bodies to the range of bodies able to apply for
approved body status under the Act.
This amendment to the Act will be followed by an amendment to the
Ministerial guideline Guidelines for the approval, variation of approval, and
cancellation of approved bodies to remove the requirement that approved
bodies be peak bodies representing the majority of businesses engaged in an
industry. This amendment will mean that State and regional industry
associations, including tourism promotion bodies, will be able to receive
EMDG grants as approved bodies.
Item 36 This Item provides that a decision by the CEO of Austrade that a person that
did not meet the Australian net benefit requirements in relation to a grant year
is a reviewable decision.
Item 37 Applicants subject to the Bill's performance measure that choose grants option
A will be subject to rules to be contained in a legislative instrument to be made
by the Minister for Trade. This Item provides for an applicant dissatisfied with
a decision made by the CEO of Austrade under this legislative instrument to be
entitled to an internal review.
Item 38 This Item adds the term Australian net benefit requirements to the Act's list of
defined terms
Items 39 - 46 Item 14 refers.
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PART 2 - Other Amendments
Item 47 This Item amends the Act's Diagram 2 - Items 3, 4 and 13 refer.
Item2 48 - 49 These Items amend the Act's Diagram 3 - Item 14 refers
Items 50 - 56 These Items amend the Act's list of defined terms in Part 9
PART 3 - Application of Amendments
Item 57 This Item provides that the amendments of the Export Market Development
Grants Act 1997 in this amendment Bill apply to any grant year that
commences on or after 1 July 2008.