Assessment principles for performance
arts or ‘cultural’ exporters claiming expenses associated with overseas touring
losses.
Background:
The EMDG Act provides
for applicants to be able to claim ‘free samples’ expenses where a product (good
or service) is given away free of charge to a foreign resident. Some ‘cultural’
exporters (bands, orchestras, theatre companies, dance companies etc) promote
themselves to overseas clients by undertaking overseas tours where they give
away free services. A more common practice is for the performance arts exporters
to promote themselves by travelling around overseas to perform services for a
loss.
This Ruling addresses two main issues that
arise when performance arts exporters incur expenses on promotional overseas
visits.
What
constitutes an eligible ‘free sample’?
How
will Austrade assess claims from those performance arts exporters who do or
who may in the future receive some income in relation to overseas promotional
tours for which any EMDG expenses are claimed? In particular, it looks at how
Austrade will apply section 46 of the EMDG to treat any income received in
relation to these overseas tours.
Section 46(1) of the EMDG Act requires that
Austrade should deduct from eligible expenses any amounts of income received by
the applicant in the course of carrying out particular promotional
activities.
This Ruling only addresses performance arts
exporters who are promoting services. Austrade Guidelines relating to the
eligible of ‘free samples’ expenses for intellectual property exporters are
different to those that apply to goods and services exporters (refer to
guideline 5.7.24). Performance arts exporters who promote intellectual property,
for example, music recording rights, should therefore seek an in-principle
opinion about the eligibility of any proposed overseas promotional
tours.
This Ruling does not address the question of
what range of expenses are claimable as ‘free samples’ (item 4 in the s.33
table) expenses. The question of what is claimable is a substantiation question
and each applicant should be able to demonstrate that its expenses directly
relate to providing samples.
Ruling:
What constitutes
an eligible ‘free sample’?
To qualify as a free sample, Austrade
requires that the applicant must receive no income for the claimed overseas tour
activity and if this is the case, expenses can be assessed at item 4 of the
section 33 table in the EMDG Act. The tour must also be conducted for the
purposes of promoting an eligible income stream.
Austrade will not assess an activity to be a
‘free sample’ where any of the following types of income is received or is
receivable.
Examples
Applicants may sometimes travel overseas to
provide ‘free samples’ (as defined above) for one overseas tour promoter but
also to separately perform income generating concerts either as a self-promoter
or for a different tour promoter. In this case, Austrade will separate out the
activities. Austrade will allow the expenses of overseas free performances as
‘free samples’ where there is a demonstrated basis to do so.
Examples
How will Austrade assess claims from
‘cultural’ exporters who undertake loss-making promotional overseas
tours?
The circumstances where Austrade will
consider allowing the expenses associated with loss-making overseas tours will
be where:
The
overseas tour is for an ‘approved promotional activity’ and is made primarily
to promote future business. Applicants would need to substantiate this by
showing, for example, that reviews of its shows are used to promote future
business or that they are seeking overseas promoters to stage future
shows.
The
applicant can show that it budgeted for a loss in its overseas tours and that
its intention was to promote future export business by being prepared to tour
for the loss. That is, Austrade will not accept that a visit is for an
approved promotional activity where an intended commercial tour resulted in a
subsequent and unbudgeted loss.
Austrade will examine the income/expenses
for an overseas tour and calculate the loss percentage factor.
Income will be all income and may
include:
Expenses will be all expenses that directly
relate to the tour and would include expenses of advertising the tour. It would
not include overhead type expenses including administrative or management
expenses.
Where an applicant is directly reimbursed for an expense (such
as subsidised air fares) or where it receives free accommodation,
Austrade will deduct this reimbursement before calculating the
loss factor.
Examples