Header graphic for print
China Law Blog China Law for Business

Financing China Movie Co-Productions. Australian Producer Offsets Can Work.

Posted in China Film Industry

In my previous post, Aussiewood Film Finance And China Co-Productions. Ever The Twain Shall Meet?  I explained how a cash rebate equivalent to 40% of feature film production costs is available from the Australian government for films with “significant Australian content” if the producer incurred “qualifying Australian production expenditure” when making the film. This rebate is known as the “Australian producer offset.” In this post, I explain how “official” co-productions between Australia and China, and between Australia and certain other nations, are exempt from some of these requirements, making it easier to access this offset.

But first, what is an “official” co-production? For purposes of the Australian producer offset, an official co-production is one made under formal arrangements between Australia and the governments of various countries. These formal arrangements are treaties or memoranda of understanding. Australia has a co-production treaty with China and also with other countries, including Singapore, Canada and Germany.  Note that Hong Kong is not considered part of China for treaty purposes, so a China-Hong Kong-Australia co-production does not qualify as an “official” co-production.

For purposes of the Australian producer offset, the main advantage of an official Chinese co-production is that it does not need to have “significant Australian content.”  To qualify for the offset, it is only necessary for the producer to have incurred “qualifying Australian production expenditure” when producing the film. Another advantage is that it is not necessary for the Australian production company to be the only production company. Still, the film needs to comply with Screen Australia’s “International Co-Production Program Guidelines.” The guidelines are subject to modification under various formal arrangements, but here are some of the basic elements:

  • The film may be based on an underlying work (such as a novel) from any country.
  • The screenplay for the film must be attributed to a writer who is a national or permanent resident of one of the co-production countries, but a non-credited writer can come from a country without a formal arrangement with Australia.
  • Generally, cast and crew must still come from an “official” co-production country, though one or a small number may come from other countries, particularly when required by the script or by financiers. Generally, credited roles which are not creative or technical roles and are not part of the making of the film, such as executive producers and assistants, need not be from the co-producing countries.
  • The film must be made in an “official’ co-production country, though there are exceptions when filming is required on location in other countries.
  • The proportion of the production budget raised by the Australian co-producer must be reasonably similar to the proportion of the budget spent on the Australian elements.
  • The Australian producer’s financial contribution must be reasonably proportional to the Australian creative contribution and the Australian producer’s financial contribution must be reasonably proportional to the spend on Australian elements.

The bottom line is that the Australian producer offset is an attractive investment incentive for co-productions between China and Australia and between Australia and the other nations with which Australia has made formal co-production arrangements.

  • Braveheart

    I guess the Aussies woke up to all those production dollars going to New Zealand for the Lord of the Rings cycle, the forthcoming Hobbit and all the film infrastructure they built because of that. Sounds like a local regional koala-kiwi competitive spat to me trying to get on the New Zealand bandwagon. But NZ also has its China agreements. You didn’t mention those.

  • Larry

    New Zealand were more awake and had movie production into a DTA with China ten years before the Australians did. Its a nice idea and I note the author is an Aussie based lawyer, but it’ll be a tough sell with high personal income tax rates and CIT at 40%. As far as I know the tax credits mentioned also take 3-4 years to work through meaning they’re not in place to offset against the production financing. Good theory. I’m not convinced about the practice. Maybe Mathew Alderson could enlighten us? Tax is the driver here after all.