EXPLANATORY STATEMENT
Issued by the Minister for the Arts and Sport
Income Tax Assessment Act 1997
Refundable Film Tax Offset Rules 2002
Division 376 of Income Tax Assessment Act 1997 (the Act) creates the refundable film tax offset (the offset), which provides for eligible film production companies to qualify for a 12.5 per cent refund on the qualifying Australian production expenditure (QAPE) of eligible films. The offset refund amount is determined by the Australian Tax Office (ATO) and is calculated on 12.5 per cent of QAPE less any tax liabilities incurred by the company.
The Refundable Film Tax Offset Rules 2002 (the Rules) are made by the Minister for the Arts and Sport pursuant to section 376-105 of the Act. That section provides for the Minister to make rules to establish the Film Certification Advisory Board, to govern the issue of provisional certificates and to specify how applications for certificates are to be made. The Minister is empowered by section 376-105 of the Act and subsection 33(3) of the Acts Interpretation Act 1901 to repeal, rescind, revoke, amend or vary the Rules.
Schedule 2 to the Tax Laws Amendment (2005 Measures No.5) Act 2005 amended the Act to extend the offset to eligible television series. It did so by making a television series an eligible genre within the definition of ‘a film’.
This instrument amends the Rules to:
- reflect the extension of the offset to eligible television series;
- update administrative requirements for the provision of information by applicants, in order to facilitate efficient assessment of applications; and
- reflect certain other minor amendments made to Division 376 of the Act.
The amendments to the Rules are minor in nature and assist applicants to provide sufficient information to allow the assessment of applications for certification.
Consultation was undertaken with industry during the development of the amendments to the Act.
Notes on clauses:
Item 1 of the Schedule to the instrument inserts television series into the list of definitions taken from the Act.
Items 2 and 4 of the Schedule to the instrument delete subrules 20(5) and 25(5) that allowed a provisional application and a final application, respectively, to be lodged with DCITA by fax. This recognises that applications are generally extremely large and it would be impractical to lodge them by fax (no applications have ever been received by fax). This also ensures that all parts of the application, including the copy of the completed film (see below), will be provided together.
Items 3, 6 and 11 of the Schedule to the instrument relate to the provision of a copy of the film with an application. Previously, an application for certification had to be accompanied by a dated selection of footage from the finished film, together with a final credits listing. This was required so that the production values of the film could be assessed and the Minister could confirm that the film was ready for release. An applicant was then required to provide a final copy of the completed film within 30 days of the film’s release (i.e. after certification).
DCITA has found that applicants prefer to provide one copy of the completed film at the time of application for a final certificate. The assessment of the film for eligibility is assisted by the details provided in the copy of the completed film. Items 11 and 6 delete the previous rules requiring the dated selection of footage and copy of the completed film.
Item 3 amends subrule 25(3) to require the applicant to provide a copy of the completed film, with a full final credit listing, in either Digital Versatile Disc (DVD) or VHS format with the application. DCITA recognises that films are more easily distributed in a digital form. As such, and recognising the degradation of film stored on video tape, the instrument allows an applicant to provide the copy of the completed film on DVD format.
Item 5 of the Schedule to the instrument addresses an amendment to the Act previously made by Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003. That Act repealed section 376-60 of the Act, relating to working out expenditure in Australian dollars, and inserted that information into item 9 of the table in subsection 960-50(6). Item 5 amends subrule 26(5) to reflect this change.
Item 7 of the Schedule to the instrument amends Part A of Schedule 1 to the Rules, which lists some information that is to be included in an application for a provisional certificate. Most of the information required for all applications under these schedules is unaltered. However, the following amendments have been made:
- Insertion of requirement to provide information about the date of commencement of principal photography or the commencement of production of a digital image (for an animation). It is a requirement for a television series that the entire series be completed within a given timeframe (different for animation and non-animation).
- Insertion of requirement to provide information as to whether any provisional certificate(s) issued under Division 10BA of the Income Tax Assessment Act 1936 (ITAA36) have been revoked. An amendment made to the Act by the Tax Laws Amendment (2004 Measures No. 7) Act 2005 provided that if a film had previously been provisionally certified under Division 10BA of Part III of the ITAA36, but the certification had been revoked under subsection 124ZAB(6A) of that Act, the revoked certificate is not a barrier to eligibility for the offset. This amendment to the Rules reflects that change.
- Deletion of requirement to provide information regarding investment by a film licensed investment company (FLIC). A requirement to indicate whether any concessional capital has been invested in a film by a FLIC has been deleted. This is because under the terms of the FLIC licence, a FLIC can only invest its concessional capital in a film that has been certified under Division 10BA of the ITAA36. Pursuant to Schedule 2 to the Rules, an applicant must already indicate if its film has been certified pursuant to Division 10BA (see above). The amendment aligns the Rules and the Application Form.
Item 9 of the Schedule to the instrument amends Part A of Schedule 2 to the Rules, which lists some information required to be provided in an application for a final certificate. The amendments in item 7, in relation to provisional applications, are repeated in the item 9 amendments, in relation to final certifications. In addition, the following changes are made:
- Insertion of requirement to provide information about access to state or territory government incentives. This is to ensure that only legitimate QAPE is claimed and that an applicant does not claim expenditure made in relation to accessing incentives from other jurisdictions. The amendment aligns the Rules and the Application Form.
- Insertion of requirement to provide a list of all Australian and non-Australian cast and crew. This is to provide the ability to check QAPE expenditure on personnel. The amendment aligns the Rules and the Application Form.
Under the amended Act, an eligible film that is a television series must meet the existing criteria for an eligible film, but must also meet additional requirements. Items 8 and 10 of the Schedule to the instrument insert new requirements for information that must be provided with an application for a provisional or final certificate for a television series. Item 8 amends Part A of Schedule 1 to the Rules, in relation to a provisional certificate, while item 10 amends Part A of Schedule 2, in relation to a final certificate. The new requirements will facilitate assessment of films against the new criteria specific for applications in relation to a film which is a television series.