Applicants promoting hotels make payments to other entities
to carry out their hotel's export marketing. These other entities may be
consultants, Australian management companies or they may be overseas
representatives related or unrelated to the applicant. Accordingly, payments of
this type may be assessed in 'overseas representation' (item 1 of the section 33
table) or 'short term consultants'(item 6 of the section 33 table), depending on
the relationships between the various parties.
An applicant's payments will often be based on the level of
sales or as a percentage of room revenue.
An applicant's payments may be to a person who also promotes
other Australian or non-Australian properties.
An applicant's lump sum or sales related payments may
include components for other eligible expenses as outlined in the section 33
table such as marketing visit expenses or advertising.
A number of assessment issues arise from this method of
operation:
A hotel paying its overseas representative an amount
based on a percentage of room revenue may be incurring eligible expenses where
Austrade is satisfied that the representative has itself spent an amount on
payments for eligible promotional activities. For example, where an overseas
representative is paid $100,000 by an applicant but only spends $40,000 on
direct expenses promoting the applicant's property, Austrade will assess the
$40,000 component as potentially eligible.
An overseas representative's direct expenses would most commonly be for fares,
advertising or communications expenses. In certain cases, salaries of the
representative may be incurred in this way where there is an adequate basis
for directly attributing salaries to promotion of the applicant's property.
Amounts paid to an Australian management company for
services which include overseas representation services are potentially eligible
where Austrade is satisfied that a suitable basis exists for attributing the
overseas representation services to promotion of the applicant's property.
Austrade will examine the payments made by the management company which are
the basis of any EMDG claim to ensure that these payments relate to the promotion
of the applicant's property.
Where an applicant pays a marketing consultant (either
Australian or overseas) to promote a property and claims the expense at item
6 of the s.33 table, Austrade would not generally allow the actual consultants
fee component because such an arrangement would be unlikely to be short term
as required by item 6 of the section 33 table.
However, where the consultant itself incurs expenses on promotional activities
covered elsewhere in section 33 table (and pays for these from amounts paid
by the applicant), these expenses are potentially eligible. Austrade will
permit consultants' expenses to be transferred from item 6 of the section
33 table to other expense categories within the table. For example, expenses
of marketing visits, advertising or communications would be eligible subject
to satisfying general eligibility criteria and subject to being directly related
to promotion of the applicant's property.
Austrade will permit transfers from 'marketing consultants' (item 6) only
where expenses are fully supported by invoices and payment records from the
consultant and where there is evidence that the consultant has incurred direct
expenses of the applicant's own promotional activity.
Where an overseas representative (item 1 in the section
33 table) incurs expenses from the applicant's payments on promotional activities
to promote a property where the expense type falls within the definition of
items 2-6 within the section 33 table, Austrade will apply the Public Policy
Ruling (PPR) 1997/1. That is, Austrade will permit transfers of expenses from
item 1 to the other categories in the table only when the particular expenses
are directly for the applicant's promotional activity as outlined in PPR 1997/1.
Put another way, applicants can transfer expenses where these would normally
be their own expense but for convenience has been incurred in the first place
by the overseas representative. The examples in PPR 1997/1 are also considered
relevant for this Ruling.
Where an overseas representative is paid by an applicant for its own share
of a generic advertising activity (say for an chain of companies or properties),
the representative may make payments to third parties on behalf of the applicant
for convenience as outlined above. Where this happens, Austrade will only
permit a transfer from item 1 to item 5 of the section 33 table when there
is a clear basis for identifying a direct cost of the applicant's own advertising
activity.
The assessment principle for identifying what is a direct cost for the applicant's
own advertising activity is that only expenses incurred by the overseas representative
on behalf of the applicant only and in addition to the representative's
normal activities can be transferred. Any expenses capable of being apportioned
between properties would not satisfy this principle and will be assessed by
Austrade to be part of the normal activities of the representative and assessable
within item 1 of the s.33 table.
An example of an expense which is potentially transferable from item 1 would
be a brochure which only advertises the applicant's property.