Categories: General Date: Jul 15, 2009 Title: How to apply for an export grantIt is critical for businesses considering applying for an export grant to research the grants available to ensure that they are eligible to receive a grant and that they can satisfy any specific requirements attached to receiving the grant. Businesses that do not undertake this research will often find that they have spent considerable time and money lodging applications only for the application to fail or be substantially reduced from the amount expected.
It is critical for businesses considering applying for an export grant to research the grants available to ensure that they are eligible to receive a grant and that they can satisfy any specific requirements attached to receiving the grant. Businesses that do not undertake this research will often find that they have spent considerable time and money lodging applications only for the application to fail or be substantially reduced from the amount expected.
By understanding the requirements of the various export grants businesses will:
How to find export grants?
Export grants are provided by the Australian Government and state governments. A starting point is the websites of the commonwealth and state governments, or contacting your local office of Austrade or the relevant state department responsible for export. If you wish to minimise your time spent on an application you could contact the Australian Institute of Export or an export grants consultant.
The main export grant is the Export Market Development Grant (EMDG) that is 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% 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 far more limited financial support and focused on a narrower band of businesses.
Who is eligible?
Australian businesses that are either sole traders, partnerships or incorporated entities (including associations and co-operatives) with an ABN are eligible to receive EMDG support.
However, where the business has a turnover of more than $50m or has previously received 8 or more EMDG, no grant is payable.
Generally businesses must be the principal in the sale of the Australian products to be eligible receive EMDG. This means that agents who market Australian products but do not actually sell the products to the overseas buyer, are not eligible to receive EMDG.
First time EMDG applicants must pass a grants entry test that Austrade will utilise 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 2 grants without necessarily having generated any export sales, although it would be likely that after 2 years of international marketing, that export sales would be achieved. Once the first 2 grants have been received, however, EMDG applicants are subject to an export performance test. This export performance test varies according to the number of grants received, but in general the amount of grant would be reduced if the level of export sales does not exceed the amount required by the export performance test.
What products are eligible?
Eligible businesses must be promoting eligible products to receive EMDG. Eligible products are goods, services, intellectual property and know-how that are substantially of Australia origin. It is the responsibility of the business applying for EMDG to substantiate that the products are substantially of Australian origin.
Eligible goods are those that are made in Australia. This includes Australian primary products that are mined, harvested, raised or fished within Australia, goods made primarily from Australian primary products (for example wine bottled in Australia from Australian grapes or wine bottled overseas using Australian bulk wine) and goods are manufactured or assembled in Australia.
Additionally goods made outside Australia where there is a significant net benefit derived by Australia from the sale of the goods outside Australia may be accepted as an eligible product. Austrade expect a substantial benefit to Australia from these products before accepting them as eligible and 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 services except for certain services excluded by the EMDG legislation. Examples of eligible services include architects, engineers, management consulting, education, tourism and advertising. Services in the fields of accountancy and law may be eligible depending upon the service provided, while other services, such as business migration are specifically excluded.
Intellectual property (including software) and know-how that has been substantially developed from research or work done in Australia qualifies as eligible products.
What expenses are eligible?
Only certain expenses are eligible for EMDG. It is important to note that any expense, to be eligible, must be for marketing the businesses eligible products internationally. Where an expense is for both marketing and non-marketing activities, then the expense must be apportioned to claim only the international marketing component. Expenses related to marketing to New Zealand are not eligible.
Airfares as well as hire cars, taxis, trains etc. 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, an allowance of $300 per day per person for a maximum of 21 days per trip is allowed.
Promotional literature and advertising
Preparation, printing and distribution of brochures, catalogues, leaflets etc. qualify as eligible expenditure. Costs of advertising in newspapers, magazines etc. together with radio and television advertising 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 costs for space, stand, hire of facilities and other associated costs.
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.
Cost of maintaining an overseas representative on a long term basis is eligible. Eligible costs include salaries, rent, travel costs, allowances and other costs involved in maintaining the overseas representation. 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. Commissions are specifically excluded. A maximum of $200,000 expenditure can be claimed for all overseas representation expenditure.
Costs of engaging an independent consultant (either in or outside Australia) is eligible to the extent that they undertake market research or other marketing activities. Eligible costs include fees and expenses, but no sales related expenses. A maximum of $50,000 expenditure can be claimed for all consultant expenditure.
Costs of overseas telephone, fax and email be claimed. These costs are apportioned and generally some basis of apportionment must be maintained by the exporter. Costs of communication in transit will qualify. Alternatively if communication costs are not claimed, the grant will automatically be increased by 3%.
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 Trademarks
The costs involved in registering and maintaining international patents and trademarks are eligible.
What businesses need to do to be 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 expenditure. 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’s products (perhaps with a travel diary or record of activities undertaken and discussions). 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.
What does the process of applying for a grant entail?
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, being 30 June. 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 2 previous years in the first application.
The EMDG application is a 4 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 the application and schedules are completed they are lodged with Austrade. Austrade will assess the application and this may involve an audit process where an Austrade officer will visit the premises of the business and review the eligibility of the business to receive EMDG, review the eligibility of the business’s products and finally review the claimed expenses. This final step will involve reviewing the documentation for claimed expenses.
After Austrade have completed the assessment, provided the business is assessed as eligible and the products are assessed as eligible, a notification of the amount of grant approved will be issued and payment of the grant made.
How much does it cost to prepare an export grant?
There can be a considerable amount of time involved in collating the necessary documentation, preparing the application form and participating in the audit. Obviously 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 that is collated and included in the application, and the preparation of additional information that may be required to support the application.
What are the advantages and disadvantages of claiming a grant?
The ability to obtain a cash grant from the government is always a great attraction. Obviously the opportunity to have part of your international marketing expenditure reimbursed by the government is attractive and the benefits to cash flow while developing international markets is often critical.
However, 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, say, $10,000 in your first year when you plan to spend sufficient funds on international marketing to achieve maximum grants in future, and by claiming a small grant now your business might well miss out a far larger grant in the future as there is a 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 these circumstance speak to an export consultant and they can advise on strategies to maximise the benefits from grants.
By Gary Cronin, Managing Director, Exportise.