Government grants are always an attraction for business and the benefits to cash flow while developing international markets is often critical. Here are some steps to ensure you’re eligible for an export grant. It is critical for businesses considering applying for an export grant to research the grants available to ensure that they are eligible, and that they can satisfy any specific requirements attached to receiving the grant. Businesses that do not undertake this research often find they have spent considerable time and money lodging applications, only for the application to fail or be substantially under the amount expected. By understanding the requirements of the various export grants businesses will:
- Not waste time lodging applications where the business is not eligible to receive a grant.
- Ensure they have the required documentation to satisfy the criteria for receiving grants.
- Have a smoother processing of their application.
- Receive their grant quicker.
The Commonwealth and state governments provide export grants. Start with the websites of the Commonwealth and state governments, or contact your local Austrade office or the relevant state department responsible for export. Good sources of information are also available from the Australian Institute of Export or an export grants consultant.
The main export grant is the Export Market Development Grant (EMDG), administered by Austrade on behalf of the Commonwealth Government. This program provides grants to reimburse international marketing expenses for the promotion of Australian products. Eligible businesses are entitled to receive 50 percent reimbursement of eligible expenses above $10,000, with a maximum grant of $200,000 per annum. Other export grants provided by various state governments are generally complementary to EMDG, providing comparatively limited financial support and are focused on a narrower band of businesses. Businesses-sole traders, partnerships or incorporated entities, including associations and cooperatives-with an Australian business number (ABN) are eligible to receive EMDG support, excepting those with a turnover of more than $50 million and/or those which have previously received eight or more EMDGs.Generally, to be eligible receive EMDG, businesses must be the principal in the sale of Australian products. This means agents that market, but do not actually sell, Australian products to the overseas buyer are not eligible to receive EMDG. First-time EMDG applicants must pass a grants entry test to ensure that the business has prospects of success in its export endeavours. It is advisable to discuss this requirement with Austrade or an export consultant if you are uncertain how this might impact on your ability to claim EMDG. Businesses are able to claim two grants without having generated any export sales. Once the first two grants have been received, however, EMDG applicants are subject to an export performance test, which varies according to the number of grants received. In general, the grant amount would be reduced if the level of export sales does not exceed the amount required by the export performance test. Eligible businesses must promote eligible products to receive EMDG. Eligible products are goods, services, intellectual property and know-how substantially of Australian origin. This includes Australian primary products that are mined, harvested, raised or fished within Australia, goods made mainly from Australian primary products-for example wine bottled in Australia from Australian grapes or wine bottled overseas using Australian bulk wine-and goods that are manufactured or assembled in Australia. It is the responsibility of the business applying for EMDG to prove this. Additionally, goods made outside Australia where there is a significant net benefit derived by Australia from their sale outside Australia may be accepted as an eligible product. Austrade expect a substantial benefit to Australia from these products before accepting them as eligible, so it is advisable to seek professional advice when lodging an EMDG application in these circumstances. Services provided to non-residents of Australia are generally accepted as eligible, except for those specifically excluded by the EMDG legislation, such as business migration. Eligible services include architects, engineers, management consulting, education, tourism and advertising, for example. Accountancy and legal services may be eligible depending upon the service provided. Intellectual property, including software, and know-how that has been substantially developed from research or work done in Australia qualify as eligible products. Only certain expenses are allowable for EMDG. Expenses must be for marketing the business’ eligible products internationally. Where an expense is for both marketing and non-marketing activities, the expense must be apportioned to claim only the international marketing component. Expenses related to marketing to New Zealand are not eligible.
Travel expenses: Airfares and transport qualify as eligible expenditure. Special conditions apply to first class travel and relatives travelling together. Accommodation, entertainment and meals for travel overseas are not eligible. However, a per diem of $300 per person for a maximum of 21 days per trip is permissible. Promotional literature and advertising: Preparation, printing and distribution of brochures, catalogues, leaflets etc qualify as eligible expenditure. Costs of advertising in newspapers, radio, television and other media are eligible. The costs involved in creating and maintaining a website for international marketing will also be eligible.Trade fairs and promotional events: Costs of participating in trade fairs, seminars, in-store promotions, international forums, private exhibitions and similar promotional events are eligible. This includes space, stand, and hire of facilities and other associated costs. Free samples: The actual cost of the provision of free samples to persons outside Australia, including freight, is eligible. Samples must be given away completely free of charge and cannot be related to the level of sales achieved. Overseas representation: The costs of maintaining an overseas representative on a long-term basis-including salaries, rent, travel costs, allowances, but not commissions-are eligible. An overseas representative could be an employee, a related entity or an independent person. Austrade expect a high level of documentary evidence to support claimed expenses. Often this expenditure is apportioned for non-promotional activities. A maximum of $200,000 expenditure can be claimed. Marketing consultants: Costs of engaging an independent consultant, either in or outside Australia, are eligible to the extent that the consultant undertakes market research or other marketing activities. Eligible costs include fees and expenses, but not sales expenses. A maximum of $50,000 can be claimed for all consultant expenditure. Communications: Costs of overseas telephone, fax and email, as well as costs of communication in transit qualify for reimbursement. These costs are apportioned and generally the exporter must maintain some basis of apportionment. Alternatively, if communication costs are not claimed, the grant will automatically be increased by three percent. Overseas buyers: The costs of bringing overseas buyers to Australia including fares, accommodation and meals qualify. There is a limit of $7,500 per buyer and an overall limit of $45,000 per grant year. Patents and trade marks: The costs involved in registering and maintaining international patents and trade marks are eligible.
Becoming grant ready
Businesses must plan their approach to claiming an export grant. This involves ensuring that it can substantiate that it is eligible to receive a grant, that its products are eligible, and that expenditure to be claimed is eligible. In most cases, this should not be difficult if the business maintains good accounting and business records. A business that intends to claim EMDG will need to ensure that it has records to support expenses being claimed and evidence that the expense is for international marketing. For example, to claim travel costs, the business would need evidence of the fares being claimed, usually a tax invoice from a travel agent, evidence of payment and evidence that the purpose of the travel was to promote the business’ products, perhaps a diary or record of activities undertaken. In addition, evidence is required to substantiate the number of days travelling to claim the $300 per diem, for example boarding passes plus a travel diary.It is recommended that businesses seek professional advice to ascertain what records are required to support expenditure. Many export consultants provide a kit to provide detailed information on documentary requirements and to allow easy collation of expenses and supporting evidence.
Applying for a grant
Most grants require a specific form to be completed within a certain timeframe. EMDG is a retrospective grant that may be claimed at the end of the financial year. Applications can be lodged after 30 June, with a deadline of 30 November for the previous year’s expenditure. The only exception is for first time applicants that may claim for the two previous years in the first application. The EMDG application is a four-page form, but Austrade also require completed schedules for each category of expense with each item of expense listed. For example, the travel schedule requires details of who travelled, where and why they travelled, dates of departure and arrival, details of fares including date paid and how paid, amount of fares being claimed and amount of daily allowance being claimed: this information is required for each trip.Once completed, the application and schedules are lodged with Austrade, which will assess the application. This may involve an audit process where an Austrade officer will visit the business’ premises to review the eligibility of the business and its products, and review the documentation for claimed expenses. After Austrade have completed the assessment, provided the business and its products are eligible, a notification of the amount of grant approved will be issued and payment of the grant made.
Costs of grant preparation
There can be considerable time involved in collating the necessary documentation, preparing the application form and participating in an audit and there is a cost to this, as there is in the cost of seeking professional assistance. The cost will vary depending on the complexity of the business and its activities, the amount of documentation collated and included in the application, and the preparation of additional information that may be required to support the application. It is important that businesses plan their use of export grants around their planned international marketing strategy. It is not worthwhile lodging a grant for $10,000 in your first year when you plan to spend sufficient funds on international marketing to achieve maximum grants in future. By claiming a small grant now, your business might well miss out a far larger grant in the future due to the limit on the number of grants that each business can receive. Likewise, the time and effort involved in claiming a relatively small grant may be greater than the benefit. In this circumstance, speak to an export consultant and they can advise on strategies to maximise the benefits from grants. - Gary Cronin is managing director of Exportise (www.exportise.com.au), a grants consultancy firm whose consultants are members of the Export Consultants Group.