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Internet and IT Companies - Web Site Construction Costs

A major marketing cost for Internet and IT companies is the costs of construction of their web site. Export Incentives has successfully lodged and received EMDG rebates for web site construction costs, provided it can be established that the web site is a marketing tool. If the web site is used to both market and deliver product, apportionment would need to take place between the two activities, with only the marketing aspect of the web site being eligible for the rebate. As the web site would be available internationally, then apportionment would need to take place between local Australasian use and international use. It is only international use that is eligible. Austrade will look at independent objective factors, such as the recorded hit rate to create an analysis of eligibility, as well as the subjective reason for construction of the web site and the markets at which it is aimed.

Many Internet and IT companies are setting up overseas representative offices and these fully qualify to the extent that these offices are involved in export sales. Unlike costs incurred in Australia, all overseas representative office costs fully qualify including salaries, rent and general office costs. There would need to be apportionment between those costs related to sales and any costs related to administration of sales (non-eligible). In addition, consideration needs to be given to the legal structure of the international office. If as is usual, it is a separately incorporated company, then there needs to be a legal relationship between the Australian company and the foreign subsidiary to evidence the foreign subsidiary's role in the selling of the Australian company's intellectual property and services.

Where the sale of intellectual property is through physical CD's, then these CD's in general terms must be produced in Australia to qualify. If (as is common) the sale is through the licence of intellectual property, then provided the intellectual property results from research or other work undertaken in Australia, if the product is ultimately delivered on a CD Rom, it is not critical to success of a claim whether the CD Rom is produced in Australia. This is a similar analogy to the music industry where a record company will licence the rights to a record master to a foreign company, who would press the CD's offshore. The export grant is then based on the licensing income obtained from the sale of the intellectual property, rather then from the sale of the non eligible good.