EXPLANATORY STATEMENT
Income Tax Assessment Act 1997
Acts Interpretation Act 1901
Location Offset Rules 2008 (Amendment No. 1 of 2012)
(Issued by authority of the Minister for the Arts)
The Location Offset Rules 2008 (the Rules) were made by the Minister for the
Environment, Heritage and the Arts pursuant to subsections 376‑260 (2) and (3) of the
Income Tax Assessment Act 1997 (the Act) on 5 February 2008.
The purpose of this instrument is to amend the Rules to reflect the changed administration arrangements ordered by the Governor-General on 14 December 2011; amend the auditing requirements set out in Schedule 3; and remove the definition of ‘Department’ in the Rules.
The changed administration arrangements ordered by the Governor-General on 14 December 2011 saw the Commonwealth department responsible for the administration of the scheme changed from the Department of the Prime Minister and Cabinet to the Department of Regional Australia, Local Government, Arts and Sport. The Rules have been revised to reflect this change in name and address, including deleting the redundant Department name and address from the ‘Form of auditor’s statement’ in Schedule 3 and inserting instructions on the ‘Form of auditor’s statement’ to insert the current address of the relevant department.
The amendments to the Rules also recast the form of the Auditor’s statement that must accompany applications for a certificate for the Offset. These amendments include the deletion of the requirement for the independent auditor to ascertain the applicant company’s qualifying Australian production expenditure on the film. The independent auditor is still required to carry out an audit on an applicant’s statement of production expenditure. The statement has also been updated to conform with current accounting practices and standards. These amendments address issues identified in the 2010 Review of the Australian Independent Screen Production Sector by reducing the administrative burden of applying for a film tax offset.
The amendments also address issues with the definition of ‘Department’. Because the Act already defines ‘Arts Department’ in section 995-1, the definition of ‘Department’ in the Rules is unnecessary and therefore will be deleted by this instrument. Consequently, the two references in the Rules to ‘Department’ will be substituted with ‘Arts Department’.
In line with this amendment, the note to the Definitions at Rule 4 will be amended to include reference to the definition of ‘Arts Department’ in the Act and so apply that definition to references to ‘Arts Department’ in the Rules. In the Act, ‘Arts Department’ is defined as the Department that:
(a) deals with matters arising under section 1 of the National
Gallery Act 1975; and
(b) is administered by the Arts Minister.
The Rules set out the application requirements and procedures for the issue of provisional and final certificates for the Location Offset. Provisional Location Offset certificates are issued by the Film Certification Advisory Board (the Board) and final Location Offset certificates are issued by the Arts Minister, acting on the advice of the Board.
Statement of Compatibility with Human Rights
This Legislative Instrument does not engage any of the applicable human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.
Consultation on the amendments to the auditing requirements was undertaken with Screen Australia and the Australian Taxation Office as required under the Australian Screen Production Incentive Program Co-Administration Memorandum of Understanding between the parties.
This instrument is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
This instrument commences on the day after it is registered on the Federal Register of Legislative Instruments.
Overview
The Location Offset Rules 2008 (Amendment No. 1 of 2012), made under the authority of the Minister for the Arts, were enacted to amend the existing Location Offset Rules 2008 to reflect the changed administration arrangements following the transfer of responsibility for the scheme from the Department of the Prime Minister and Cabinet to the Department of Regional Australia, Local Government, Arts and Sport. This amendment ensures the rules align with the current administrative structure and addresses practical concerns identified in the 2010 Review of the Australian Independent Screen Production Sector. The changes include modifying the auditing requirements to reduce administrative burdens and updating the auditor’s statement to conform with contemporary accounting standards and practices. Additionally, the amendment removes the redundant definition of 'Department' in the Rules and replaces it with references to the 'Arts Department' as defined in the Income Tax Assessment Act 1997, thereby streamlining the regulatory framework.
Scope and Application
The Location Offset Rules 2008, as amended by the Location Offset Rules 2008 (Amendment No. 1 of 2012), apply to entities involved in film production in Australia that seek to claim an offset under the Location Offset scheme. These Rules, issued by the Minister for the Arts, are made pursuant to the Income Tax Assessment Act 1997 and the Acts Interpretation Act 1901. They outline the requirements and procedures for obtaining provisional and final certificates for the Location Offset, which are administered by the Film Certification Advisory Board and the Arts Minister, respectively. The amendments to the Rules reflect the administrative changes from the Department of the Prime Minister and Cabinet to the Department of Regional Australia, Local Government, Arts and Sport, ensuring that the current department details are used in the required auditor's statements. The changes also streamline the auditing process by modifying the auditor's statement form to align with contemporary accounting practices and standards, while removing redundant requirements and definitions that are already covered by the Act. This amendment seeks to reduce the administrative burden on applicants and enhance the efficiency of the Offset scheme.
Key Provisions
The Location Offset Rules 2008 (Amendment No. 1 of 2012) (the Amendment) amends the original rules made under the Income Tax Assessment Act 1997 to reflect changes in the administration of the film tax offset scheme and to revise the auditing requirements set out in Schedule 3. The most notable change is the shift of responsibility from the Department of the Prime Minister and Cabinet to the Department of Regional Australia, Local Government, Arts and Sport, which is reflected throughout the Rules (subsection 376-260(2), (3)). The Amendment also removes the definition of ‘Department’ from the Rules and substitutes it with ‘Arts Department’, which is defined in the Act (section 995-1).
The Amendment imposes specific obligations on applicants for the Location Offset. It requires the applicant to submit an audited statement of production expenditure to the Film Certification Advisory Board for a provisional certificate, and to the Arts Minister for a final certificate. The independent auditor must verify the applicant's statement of production expenditure, but is no longer required to ascertain the qualifying Australian production expenditure on the film (Schedule 3, Rule 13). This change aims to reduce the administrative burden on applicants. The auditor’s statement must now be updated to conform with current accounting practices and standards.
Failure to comply with the requirements of the Location Offset Rules 2008 can lead to civil and criminal consequences. The Act imposes penalties for providing false or misleading information, which can result in fines and potential criminal charges. The specific penalties are outlined in the Income Tax Assessment Act 1997, which may include fines up to the greater of $22,200 or three times the benefit obtained by the false statement (subsection 181(1)). Additionally, the Commissioner of Taxation has the authority to audit applications and can request further information or documentation if deemed necessary.
The Amendment also clarifies the definition of ‘Arts Department’ by aligning it with the definition provided in the Act. This ensures consistency and avoids redundancy in the Rules. The changes are designed to streamline the application process and improve the efficiency of the film tax offset scheme, ultimately benefiting both applicants and the administering department.