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Joint Ventures May Be Missing Out On Grants


The Australian Financial Review
April 19 1996, Mark Lawson

Companies setting up joint ventures overseas may be missing out on millions of dollars in export grants, although they may not plan on exporting anything more than their own expertise, according to a senior lawyer.

Mr Warren Cross, an intellectual property specialist in sole practice in Sydney, said he had obtained a private policy ruling from Austrade indicating that export grants could be obtained by any company with a joint venture.

The company had only to structure the deal so that instead of simple receiving profits or dividends, it received royalty payments on the expertise brought to the joint venture.

Then the company would be eligible for a grant from the Export Market Development Grant scheme of up to $200,000 a year for six years, or $1.2 million.

Set up to help exporters 20 years ago and administered by Austrade, the EMDG covers manufactured exports as well as the exports of certain forms of services – but services eligible for the grants are limited to a list kept by Austrade.

However, the scheme may be abolished in this year’s Budget if the Federal Department of Finance gets its way.

Mr Cross, who also specialises in the EMDG scheme, said that Austrade’s administration of the scheme had become tougher since a report criticising aspects of the scheme was released by the Australian National Audit Office (the report was released in 1994).

Also, he had become aware of a number of applications for export grants for joint ventures that had been rejected, without the applicants being told the reasons for the rejection.

He said the private policy ruling from Austrade indicated that for export earnings to qualify for a grant, there must be an obvious link between the know-how exported and the income it earned for the Australian partner.

The letter indicated that if the income was received in the form of a royalty, licence fee or success fee, rather than in the form of profits, it would be eligible for a grant of 50c for every $1 spent on promoting that income.

The fees received need not be for intellectual property such as copyright material. They could be paid for expertise in areas such as advertising, public relations, insurance and real estate, as well as funds management and investment services.

As a result, a great deal depended on how the joint venture was structured to ensure that payments were linked to expertise and not simply labelled profits.  Once the documentation had been set in place, it would be very difficult to alter, he said.

Mr Cross agreed that if all the new joint ventures took advantage of the ruling, the grants awarded under the scheme would increase, but commented that the purpose of the scheme was to help companies setting up overseas.