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Film industry reform--and an election.

ONE OF THE LAST pieces of legislation to be passed by federal parliament before the September/October recess (and presumably before the federal election, which at the time of writing had not been called) was the Schedule 10 amendments to the Income Tax Assessment Act (1997), establishing the Australian Screen Production Incentive. The aim is to provide more than $280 million over the next four years in changed or increased incentives for Australian film and television production and for offshore productions to locate to Australia. However, the companion legislation creating the so-called super-agency (now to be called Screen Australia) was not introduced in time to pass.

But what difference will an election, and a possible change of government, mean to what the Minister for the Arts and Sport, Senator George Brandis, has called the most fundamental reform to Australian Government film financing in the last twenty-five years? Probably not much, given that Labor has not opposed the legislation in its progress through parliament. In fact, in its Arts Policy, 'Labor welcomes the Government's long-overdue response to the film industry review, including the introduction of the Producer Offset, the Location Offset, and the creation of the Australian Screen Authority ...' However, recognizing the specific concerns raised by the independent production sector to the government's reforms, Labor also promises to 'conduct a review of the viability of the independent production industry, commencing within twelve months'.

We might expect more changes in the process needed to establish Screen Australia, and there are major differences in the attitude of the two parties over the future of the National Film and Sound Archive (NFSA), in particular. But the industry has been concentrating for so long on getting this new system of government support in place, that the approaching ejection, and even the prospect of a change of government, has played a surprisingly small role in the overall agenda. With the incentives now in place with bipartisan support, other issues may come into prominence.

The incentives themselves, heralded in this year's Budget and welcomed by most in the industry, especially by those who feared they'd be sidelined by a suddenly called election, comprise:

* a Producer Offset which provides a forty per cent rebate to producers of Australian films and a twenty per cent rebate for the production of other media

* a Location Offset which provides a fifteen per cent rebate to attract large-budget overseas film and television productions to Australia

* a PDV Offset, providing a fifteen per cent rebate on post, digital and visual effects production work of over $5 million regardless of where a screen project has been shot.

Apart from already existing certificates, the 10B and 10BA provisions of the Income Tax Assessment Act no longer apply.

In response to industry feedback that many animations, especially for children, are of shorter duration than other series, a late amendment was made to the legislation during its passage so that animation series with episodes of fifteen commercial minutes would be an eligible format for the purposes of the Producer Offset.

Announcing the legislation, Senator Brandis said:

The introduction of the Producer Offset reflects the government's view that a sustainable and independent screen production sector is crucial in building a stronger Australian film and television production industry.

While the government was aware of concerns from the independent production sector regarding the Producer Offset's potential impact on the level of independent production in Australia, it didn't believe that eligibility for the offset should be quarantined only to the independent sector. In fact, according to Senator Brandis:

the Producer Offset will provide a real opportunity for independent producers to retain substantial equity in their productions and build stable and sustainable production companies, which should therefore increase private investor interest in the industry.

During the pre-legislation rounds of public and private consultation, submissions, and review by a Senate Economics Committee, industry groups raised strenuous objections to the fact that Australia's television networks will be able to claim the twenty per cent offset on their in-house productions. They argued that the offset was only intended to support independent producers. While there has been no amendment to the legislation, Senator Brandis said the government 'will not look favourably on any evidence that broadcasters are using the offset to reduce their licence fees, to the detriment of the independent sector'.

The government has also agreed to commence a statutory review, within twelve months of Royal Assent for the legislation, on the impact of the new offsets on the balance between in-house and independent productions. The minister added:

I will also direct the new film agency, Screen Australia, which is to be established in mid2008, not to provide production funding to in-house productions by broadcasters, consistent with the existing practice of the Film Finance Corporation Australia.

Producers now need to work out just how to use the new incentives. The relevant government departments will provide rules for their use, to be expanded into guidelines by the Film Finance Corporation, which will administer certification until Screen Australia comes into being. In this interim period, minimum Australian production expenditure thresholds will apply and the 'Australianness' test will be based on existing section 10BA criteria. Various industry bodies are planning workshops and information sessions to help filmmakers with the substantial changes to business methods and structure that will be necessitated by the new system.

Geoff Brown, the executive director of the Screen Producers Association of Australia, has commented on the government's change of language in the legislation:

It's no longer a rebate, it's a tax offset. The thinking in government was that if you went with the rebate, people would just see it as forty per cent--or twenty per cent--back into the pocket when it's not. It's netted off against your tax obligations.

Some people are still not convinced that the new system will be better for the industry than 10BA. Actor Chris Haywood, in an interview for October 2007's FILMINK, says that the forty per cent rebate will work fine for corporates:

If they're investing within the corporation, they don't pay any tax on their investment in the film, because it's within their own company, and they get their forty per cent back straight away,

But in the case of the independent filmmaker:

[He or she] lost the forty-seven per cent they could offer their investors, and the independents were principally looking for the private investor who needs a little bit of incentive. Obviously that forty per cent isn't [all] going to the investor, because the producer is going to take some administrative and other costs ... [so] the investor is only going to see part of that. It's like censorship on independent filmmaking.'

Productions of under $1 million will still not be eligible for the offset, despite much lobbying. While the concerns of low-budget filmmakers excluded from accessing this scheme were considered, it was apparently decided that the government should not actively encourage the production of low-budget feature films in Australia by expanding access to the producer offset. It was believed that the long-term sustainability of Australian film production companies would not be ensured by making feature films with budgets of less than $1 million.

Garry Maddox asked in The Sydney Morning Herald (3 October 2007) whether 'the incentives [will] encourage quality films ... or just more of them?' He mused:

Is there enough creativity and boldness in this country to produce regular triumphs? And will the new incentives see a return to the sharp practices and outright rorts that blighted the production boom under the Division 10BA tax incentives in the 1980s?

Maddox found enthusiasm from producers on both sides of the Pacific who were gearing up to take advantage of the new incentives for film and television production, with some predictions of a welcome return to full employment for the film industry.

However, Mel Gibson's producing partner, Bruce Davey, who hopes to use the rebate to kick-start Australian projects, has said he does not want to see it abused. 'I think everyone in the Australian film industry has to be very careful,' he told The Australian last month. 'If bad films get made because of the tax rebate, it's not going to do any of us any good.'

Screen Australia--a work in progress

In the 2007--08 Budget, the government announced that an Australian Screen Authority would be established, bringing together the majority of the functions of the Australian Film Commission, Film Finance Corporation Australia and Film Australia Limited. While the legislation referring to the so-called super-agency, now to be called Screen Australia rather than the Australian Screen Authority, was not introduced in parliament before the recess, the draft of this legislation was circulated in early September, giving interested parties under two weeks to respond.

In a letter to film industry stakeholders, Senator Brandis explained that in light of consultations the government had agreed that the new body should be called Screen Australia 'to reflect its role in promoting the growth of a more competitive Australian screen production industry'.

The draft legislation outlined the proposed functions and powers of this new body, together with the proposed governance and accountability arrangements. Senator Brandis explained that:

the functions largely reflect the combined functions of the existing agencies but also emphasize the government's desire to see the agency promote an improved commercial focus in the sector, and the development of areas of particular public interest, such as documentaries and children's programs. Statutory acknowledgement of a National Film and Sound Archive is also provided for in the draft legislation.

The draft legislation maintains the NFSA as a distinct entity, although without a separate board. This classification is not extended to Film Australia, whose role and identity will be determined by Screen Australia.

Senator Brandis anticipates much discussion in coming months on detailed policies, priorities, programs and organizational arrangements within Screen Australia (and presumably this process will take place even if the government changes). He said:

I am keen that the public and the industry have the ability to consider these very important issues. A high level committee has been examining implementation issues associated with the merger. The committee, comprising the CEOs of the affected agencies and the Department of Communications, Information Technology and the Arts, will shortly be commencing detailed consultations on these issues, now that the draft legislative framework has been made available.

With the definition of an Australian program as a program 'that, in the opinion of Screen Australia, has, or will have, a significant Australian content', the establishment of guidelines to control this definition should be one issue that is hotly debated over the next months. And the following definition of a program should certainly create some lively discussion:

(a) a screen production;

(b) an aggregate of sounds embodied in any material;

(c) an aggregate of images or sounds, or of images and sounds, that is, or is intended to be, distributed without first having been embodied in any material.

The functions of the new body are described in very general terms, ranging from to 'support and promote the development of a highly creative, innovative and commercially focused Australian screen production industry', to being able to support or engage in 'development, production, promotion and distribution', and to 'support and promote the development of screen culture in Australia'.

Under these terms all the existing functions of the three organizations to be combined into Screen Australia will be able to continue, including Film Australia's commissioning and production roles. Just how these functions will be defined and allocated within Screen Australia is another issue which should bring about much debate.

Screen Australia is to have a board of between five and nine members, to be appointed by the minister, and a chief executive appointed by the board, after consultation with the minister. While the body must prepare its own corporate plan (annually, to cover the next three years), it must be approved by the minister, and 'the minister may give the board written instructions with which the board must comply in preparing the plan and any variations to the plan'.

National Film and Sound Archive

While statutory acknowledgement of the National Film and Sound Archive is provided for in the screen agency draft legislation and maintained as a distinct entity (although without a separate board), the Arts Policy of the ALP promises to legislate to make the NFSA a statutory authority, 'following the de-merger of this institution from the Australian Film Commission'. This statement is included in a section of the policy to do with national collecting institutions, museums, libraries, galleries and archives, which are seen as 'valuable sources of cultural information, playing a critical role in safekeeping and celebrating the rich and diverse cultural heritage of Australia'.

The policy also states that Labor will ensure that each national cultural institution develops a Charter of Operations that guarantees the operational integrity of the institution, and identifies its national responsibilities.

Charters will ensure that our national institutions cultivate regional participation and access to programs. Labor will require our national institutions to share resources where appropriate and identify opportunities to develop and grow the independent creative sector.

Presumably this directive will apply to a newly independent NFSA.

Four groups concerned for the future well-being of the NFSA--the Australian Society of Archivists, Australian Historical Association, Friends of the National Film and Sound Archive, and Archive Forum--have expressed cautious optimism over the government's promise to give the NFSA a 'distinct and prominent profile' within Screen Australia. Yet they note that this undertaking falls well short of what they believe is 'the NFSA's need for permanent, statutory autonomy':

a need which cannot be met while the NFSA remains a subordinate part of another, essentially dissimilar, organisation. This reality has bedevilled the NFSA's relationship with the AFC since its attachment in mid-2003, characterized by differing perspectives, conflicting agendas, and reduced accountability and transparency.

The groups argue that the NFSA, established in 1984 to preserve and make accessible the nation's audiovisual heritage, is by nature a permanent entity.

[When the NFSA] was placed in 2003 under the control of the AFC--as events have shown, an inherently impermanent body without any safeguards for its continuity [it] lost the governance protections available to all other national memory institutions. The new arrangement failed to gain the endorsement and support of the NFSA's constituency.

They have reiterated that the principles set out in their joint statement of 5 July 2006, Independent Statutory Authority Status for the National Film and Sound Archive, remain indivisible. Catherine Robinson of the Australian Society of Archivists says:

The NFSA is like any other national cultural memory institution such as the Australian War Memorial and the National Archives of Australia which are characterized by the very long term nature of their activities and the 'public good' nature of the institution. It's an accident of history that the NFSA isn't a permanent institution and by making the NFSA a statutory body it would guarantee its security and curatorial independence.

The four groups must be very pleased with the ALP Policy.

The research transfer

The transfer of the AFC's research function to the Australian Film TV and Radio School (AFTRS) was one of the big surprises in the announcement of the details of the combined screen agency. The reasons behind that move have been regarded with some suspicion. The transfer should be another area of difference between the two parties, if questioning at this year's Senate Estimates Committee hearings is any guide. Labor's Senator Stephen Conroy was very interested in the transfer of the AFC research function to AFTRS, interrogating Chris Fitchett (then acting CEO of the AFC), who diplomatically answered that the functions needed to be carried out and the administrative arrangements were subsidiary.

South Australian ALP Senator Dana Wortley then questioned Senator Brandis on the transfer, asking whether the government was unhappy with the performance of the research section of the AFC. Senator Brandis said that it wasn't a question of whether the government was happy or unhappy.

A judgement was made in the conclusions of the review that were put to government, and which were adopted by government, that a more appropriate location for the research and statistics function was, given the pre-existing expertise of AFTRS through the screen business unit, to locate it there.

Senator Wortley then asked whether Brandis would agree that the AFC has an internationally recognized reputation for research and analysis, and he replied that he had no criticism to offer of the performance of the statistics and research function.

The only relevant question is a structural question, given there had been the consolidation of the agencies, of whether it was more appropriate to relocate that function with AFTRS, which of course is not being consolidated with other agencies.

He then repeated his statement about the pre-existing expertise of the AFTRS screen business unit.

Senator Wortley, obviously well briefed, asked about the thousands of pages of data published and regularly updated online in the AFC's Get The Picture, and the approximately 5,000 enquiries per year from government, industry, media, students and the public to which the AFC responds. 'Is it envisaged that the AFTRS will take over this service?' she asked. Senator Brandis reiterated: 'AFTRS will take over the statistical functions, which will no longer be under the umbrella of the new Australian Screen Authority. It is not envisaged that the function will change.'

Rebuffed games industry seeks support

The local games industry is another group that will be hoping for more favourable treatment from Labor if there is a change of government. The Games Developers' Association of Australia had previously asked the government for the forty per cent investment rebate announced for the Australian film industry to be extended to the interactive entertainment sector. The GDAA's submission to the Minister for Communication, Information Technology, and the Arts, Senator Helen Coonan, specifically asked for the 'immediate formation' of a working committee to examine the introduction of the rebate, as well as support for payroll tax incentives.

Senator Coonan replied that games producers would not be seeing the forty per cent rebate extended to their industry, although she argued that 'the introduction of a Location Offset is expected to have positive indirect flow-on effects for screen businesses, as digital and visual companies develop larger and more skilled workforces'.

GDAA CEO Greg Bondar said the introduction of a rebate for games producers would have led to an additional AU$25 million in new investment into Australian-developed titles. The GDAA has also approached the Opposition spokesman for Communications and Information Technology, Senator Stephen Conroy, who was reportedly 'very sympathetic' to the game sector's calls.

Tina Kaufman is a freelance writer on film.
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Title Annotation:SHORTCUTS
Author:Kaufman, Tina
Publication:Metro Magazine
Geographic Code:8AUST
Date:Oct 1, 2007
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