Last Tuesday’s budget contained the biggest redesign of the production system for our film and television industry since the creation of the Film Finance Corporation in 1989. This new system will be with us for many years to come.

Ripple dissolve back to 2004. The industry vigorously opposed the Free Trade Agreement with the US, because it capped government investment levels and content regulations. Indeed, the fight was so intense that Kim Dalton, the then head of the Australian Film Commission, flew to the US to lobby against it, on the AFC budget and allegedly with the support of the Minister, Rod Kemp.

After the agreement was signed (hissss…) the industry Smarties in the Screen Producers’ Association, the other Guilds and the agency policy sections realised that tax regulation was excluded from the agreement.

John Howard was the treasurer who introduced the notorious 10BA tax provisions, which were so hugely rorted the Labor government eventually agreed to set up an new government agency to function as an industry bank. Could Honest John be enticed back into the tax arena?

The Smarties put together a scheme, and managed to get the Liberal Party to add an enquiry to their policy platform for the next election. They dragged the chain on that, but constant nagging led them to set up an enquiry last year.

Somehow, a strange idea took root and grew – to amalgamate the various federal agencies into one big Superbody. The Smarties told each other it was a lay down misere, and they decided to support it, thereby making it real. I am on record as bleating in opposition to this, because I figured it was a dumb idea and I could see how we could scare the politicians by pointing out they were creating a powerful bureaucracy with a separate board, which might not be under control.

I didn’t like it because I believe in the “many doors theory” which says that cultural funding should have alternate routes with alternate gatekeepers and a plurality of cultures. We have already had a Superagency – everything used to be run by the AFC, which was much larger. Besides, I reckon we will have two years of chaos, and resources diverted from filmmaking to a) research b) plot and argue c) build a new organisation d) move and e) pay off the casualties.

As of the budget, we have a Superagency, to be called the Australian Screen Authority (taDA!) which will incorporate the FFC, Film Australia, much to its surprise and possible sorrow. and the AFC, which has already hoovered up the National Film and Sound Archive.

It will be mashed together on July 1st, 2008. At the moment, they don’t even have compatible computer systems. None of these groups will do the same thing after the amalgamation; on that I will bet my continuing fragile presence in the film industry.

It will do all those things that the organisations are charged with now, though the officionados of bureaucracies may notice that the enabling rhetoric is all drawn from the AFC charter. This is cultural development, in the national interest, not a bank to service an industry.

More important to the world beyond Smartieland is the birth of a new tax regime to support the industry. Here I am going to pinch some pieces from Screen Hub, since we have been writing obsessively about it since 7.30pm on Tuesday. The new system is based on:
– a Producers’ Rebate set at “40 percent of eligible Australian expenditure to producers of qualifying feature films, with a 20 per cent rate for qualifying television productions.”
- a Location Rebate on Australian expenditure for overseas productions shooting here. This already exists, but has been raised from 12.5% to an internationally competitive 15%.
- similar 15% rebate for all post production expenditure over $5,000,000 in the one show, even if it is not shot here. So, the next Chinese epic run through Australian computers for $6,000,000 puts $900,000 in taxpayers money into their Hong Kong bank account.

The most interesting part for filmmakers is the 40% producers’ rebate. They will present a budget to the FFC (and later the ASA), get a provisional certificate, shoot the film, get the budget audited through the agency, and get their money.

The FFC will be allowed to co-invest with the rebate, up to 75% of the whole budget. However, the decision to do this will be made on ground of cultural and industry development grounds. It is not a simple business decision.

This scheme is not like 10BA, oh no, not at all. Put that thought right out of your head. It is run by film experts, not hapless DCITA staff reading film budgets. It is audited by industry accountants. The rebate will only cover the “above the lines” up to 20% of the total budget, which stops crooked Smarties from putting in vast executive producer fees as happened with 10BA, in which only a third of the money raised was used to make films.

This system may sound like a lurk, but actually it is just another way of putting government money into the budget of the film, with less bureaucracy but a reasonable level of oversight. To the pleasant surprise of all the massed Smarties, it is an uncapped scheme. At the moment, the investment comes mostly from an agency budget, which is too low. It supports private investment in films more directly because it is easier for investors to get their money out first (the other players “subordinate” themselves, in the relevant jargon). And, the rebate belongs to the producer – it represents the producer’s equity in the project.

This is very important, since it means the producer’s company gains an asset, which is a film with a real chance of a return. Unfortunately, the producer has to go to the bank to borrow the money. We know the system works because the Brits already do it, and various banks like the Royal Bank of Scotland are used to these deals, and to making handsome profits from it. No risk, but a serious discount. You borrow a million, you get $800,000…

There are minimum levels in this scheme. The feature film budget has to be a million dollars, which is pretty reasonable. But in television, where the rebate is only twenty percent, the figures are high. $250,000 per fifteen minutes for animation is fine for a feature and impossible for television.

The documentary mob, as always, is stuffed. Has to be $250,000 per hour minimum, with a spend of at least $500,000. That only refers to expenditure inside Australia. Do not think internationally and write this on the office wall: Think parochial, now!

This is all up for grabs, and will evolve in discussion. I think the threshholds will change hugely as the various parties plug numbers into different cumulative scenarios. After all, the levels are mostly there to stop people from using their home equipment to make “feature films”.

There are a couple of truly weird touches. The AFC has run a research branch for thirty years, and the government has explicitly told them to transfer it to AFTRS, to a tiny Centre for Screen Business which has only run for two years. I have the reason on excellent authority – the feds have worked out that a single super-agency will indeed be a monster. The last thing they want to do is rely on it for research and policy advice.

We are also wondering whether the broadcasters can participate in the scheme. At first it seemed as if Seven could simply demand that 40% of the budget for All Saints be sent over in a brown paper bag encased safely in an armoured car. But existing shows are excluded and existing budgets are too low as well. SPAA would still like an iron gate around the system with a big sign that says: Piss off everyone named Stokes and Packer.

The Smarties are very worried about the schedule. There has to be a period of consultation, partly because this is tax legislation. Very simple definitions will be evolved – what is Australian, what is a producer etc etc.. The legislation will be crafted and put, in a crowded program, just before an election. Can it be done in time? What happens in the interim?

The FFC has already said it won’t set up a temporary system in the meantime, and it will continue to use the old guidelines until this is in place. So do producers go now, or wait? Which regime do investors accept?

The federal agencies must now devote resources to working out the new structure, which is complex. Attention will be directed away from development and production – that is inevitable. Many people will be antsy about keeping their jobs. Project managers know they make much more money in an agency than outside it.

Once the system is developed, there could be a mad rush to production. To get there, we will have demands to fund development which I think will be larger than normal, while agency budgets are diverted. We will see whether clever state agencies can dump a heap of money into development, and find news ways to support projects which will mostly depend on private money.

Unfortunately, there is always pressure in screen production to get out the camera and make the bloody picture. That is where everyone has fun and producers make a living. We already have a crisis with underdone scripts, according to some of our wiser apparatchiks.

At the end of the day, this industry has to make some good films and television programs. It needs to do better in the marketplace. All the players are on their knees for this, because returns = a living.

Going to be a wild ride for a few years.

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The still comes from Mad Max, which is the kind of picture we are happy to have on the slate. What we are afraid of is this – Alvin Rides Again

This entry was posted on Sunday, May 13th, 2007 at 3:44 am and is filed under Austrapolitics, visual media. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.