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Thursday, 14 May 1998
Page: 3333


Mr WARWICK SMITH (Minister for Family Services) (9:39 AM) —I move:

That the bill be now read a second time.

The government recognises the importance of an active, innovative and vibrant Australian film industry—both on cultural and economic grounds. The portrayal of uniquely Australian perspectives and stories is important to us as a nation. Australians are proud of the high standard and successes of our film industry, and there is increasing interest in contributing to that success through avenues such as investment. We also recognise that the production of film is a high risk business, and that it is necessary to provide incentives for the private sector to invest in the film industry. Division 10BA of the Income Tax Assessment Act was introduced in 1981 to encourage a broader base of private investment for Australian films. Whilst 10BA has been important in attracting private investment into the industry, there are flaws with the system. A number of films were never released while others appear to have inflated budgets.

As part of his wide-ranging review of Commonwealth assistance to the film industry, Mr David Gonski, a leading corporate lawyer in Australia, recommended that the current 10BA and 10B taxation concessions be replaced by the introduction of a Film Licensed Investment Company tax concession. The government consulted widely on the detail of Mr Gonski's proposal. We listened to industry concerns about replacing 10BA and 10B with a completely new and untested mechanism. As a result of these concerns we decided not to replace 10BA until the FLIC scheme had been properly trialled. The government will retain 10B. The FLIC scheme will operate alongside the current 10BA concession for two years from the 1998-1999 financial year.

The adaptation of Mr Gonski's FLIC model signals an innovative and exciting new approach to government support to the film industry in Australia. The FLIC scheme provides an opportunity for the Australian film industry and the investment sector to work together in attracting more effective and wide-ranging private investment into the development and production of qualifying Australian films. It is envisaged that the FLIC scheme will be able to tap into a part of the investment market which has shown interest in the past in investing in the film industry. As the film industry matures and develops, the government believes that sophisticated investors will be attracted to investing in a slate of film and television productions across which their risk can be spread.

This bill enables the introduction of the Film Licensed Investment Company pilot scheme. Under the scheme up to $40 million worth of concessional capital over the two-year period will be allowed to be raised for investment into qualifying Australian film and television product. A Film Licensed Investment Company will be a commercially driven company that will invest in a slate of eligible film and television product. Companies will be selected through a competitive application process. Shareholders will be eligible for an upfront tax deduction of 100 per cent on their investment into the company.

While the licence period for raising concessional capital will apply for just two years, the FLIC will have up to three years to invest the capital and up to four years to complete production. The FLIC will be able to start raising non-concessional capital at the end of the two-year licence period.

This represents a major commitment of Commonwealth funding to the film industry. The cost to government is estimated to be up to $20 million over the two-year pilot period. The FLIC scheme will deliver support to the industry that is transparent and accountable, and afford investors an alternative avenue for investment in film. This introduces a level of contestability between current funding sources through the provision of an alternative source of funds from that currently available from the Film Finance Corporation and that which can be raised under division 10BA. The FLIC scheme will support and promote the ongoing development of the Australian film industry by facilitating the establishment of a new Australian owned and controlled company that will raise capital primarily from Austral ian investors for investment in qualifying Australian film.

The FLIC does not replace any existing funding for the industry, rather it will complement those programs. The government recognises the vulnerability of the industry, especially for some of the most culturally sensitive genres, and need for certainty for investors and producers alike. Forward funding for the Australian Film Commission and the Australian Film Finance Corporation was confirmed in the 1997-98 budget, and the continuation of film agencies was confirmed in the government's response to Mr Gonski's report in November 1997. I present the explanatory memorandum, which covers this bill and the next. I have pleasure in commending the bill to the House.

Debate (on motion by Mr O'Connor) adjourned.