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Export Market Development Grants Amendment Bill 2013

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2010-2011-2012-2013

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

HOUSE OF REPRESENTATIVES

 

 

 

EXPORT MARKET DEVELOPMENT GRANTS

AMENDMENT BILL 2013

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

(circulated by authority of the Hon Dr Craig Emerson MP, Minister for Trade and Competitiveness, and Minister Assisting the Prime Minister on Asian Century Policy)



 

EXPORT MARKET DEVELOPMENT GRANTS AMENDMENT BILL 2013

OUTLINE

This Bill aligns the Export Market Development Grants (EMDG) scheme rules to the revised level of scheme funding. It concentrates the scheme more heavily on East Asian, emerging and frontier markets, in line with Austrade’s greater emphasis on these markets, and helps achieve savings of $25 million per year. The Bill removes the limit on administrative expenditure from the legislation and introduces a power for the Minister to set the limit on administrative expenditure by a determination. It also contains technical and simplification measures.

The purpose of this Bill is to amend the Export Market Development Grants Act 1997 (the Act) to:

•           increase the maximum number of grants to eight (excluding approved bodies and joint      ventures)

•           exclude expenses relating to the promotion of sales to the markets of the USA, Canada     and the European Union in grant years six, seven and eight for all applicants except    approved bodies

•           remove the limit on administrative expenditure from the legislation and introduce a           power for the Minister to set the limit on administrative expenditure by determination

•           prevent further approval of joint ventures after 30 June 2013

•           remove event promoters from the EMDG scheme

•           prevent the payment of grants to applicants engaging an EMDG consultant assessed to     not be a fit and proper person

•           enable a grant to be paid more quickly where a grant is determined before 1 July    following the balance distribution

•           require applicants to acquit claims by individually paying for claimed expenses

FINANCIAL IMPACT

Expenditure under the Act is set through annual Appropriation acts. A capping mechanism ensures that expenditure under the scheme is limited to the amount appropriated.

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

The bill does not raise any human rights issues and is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

EXPORT MARKET DEVELOPMENT GRANTS AMENDMENT BILL 20 13

ABBREVIATIONS

EMDG Act                 Export Market Development Grants Act 1997

grant year                    The year in which expenses are incurred by a grants applicant

Austrade                     Australian Trade Commission

the scheme                  The scheme of financial assistance to exporters covered by the Export Market Development Grants Act 1997

NOTES ON CLAUSES

Clause 1           This Act may be cited as the Export Market Development Grants Amendment Act 2013.

Clause 2           This Act commences on the day on which it receives Royal Assent.

Clause 3           There is one Schedule amending the Export Market Development Grants Act 1997.

SCHEDULE 1—Amendment of the Export Market Development Grants Act 1997

Part 1 Amendments commencing on Royal Assent

Item 1            

This Item repeals the Reader’s guide to the Act (including the list of terms defined in Part 9) as a simplification measure. The Part 9 terms are already defined in the body of the Act.

Item 2

 

The Act currently provides for applicants (other than approved entities) to receive a maximum of seven grants. This Item increases the maximum number of grants payable to an applicant to eight. Joint ventures (approved as at 30 June 2013) are entitled to receive a maximum of five grants. Approved Bodies continue to be entitled to receive an unlimited number of grants.

 

Item 3

 

Refer Item 2 for background. This Item provides that trustees for trust estate businesses are eligible to receive a maximum of eight grants.

 

Item 4

 

The Act currently provides that event promoters promoting a range of Australian events, including conferences, meetings, conventions and exhibitions, are able to receive EMDG grants. They are able to receive grants for spending to maximise their Australian clients’ delegate or audience number, notwithstanding the fact they are paid by these clients to undertake the event promotion work.

 

This Item provides that the promotion of events ceases to be an eligible product category under the EMDG Act from grant year 2013-14 and onwards - refer to Item 23 for the application provisions.

 

Applicants promoting eligible Australian events as principal continue to be eligible for EMDG support under the eligible services product category. Applicants promoting venues and associated facilities for meetings, conventions and exhibitions as principal also continue to be eligible for EMDG support.

 

Item 5

 

Refer to Item 4

 

 

Item 6

 

Refer Item 4

 

Items 7 & 8

 

Apart from expenses incurred promoting exports to New Zealand, Iran and North Korea, the Act currently enables applicants to claim for expenses incurred to promote exports to all export markets.

 

This Item provides that applicants claiming for their sixth to eighth grants will only be able to receive EMDG support for expenses incurred to promote exports to markets other than USA, Canada and European Union member states. Applicants are entitled to claim expenses incurred to promote exports to all markets for their first five grants.

 

In deciding whether claimed expenses are to promote exports to one market or another, Austrade will deem expenses to be for the market where export sales are to be made. For example, an applicant will be entitled to claim expenses of attending a USA trade show in its sixth grant year application to the extent that its expenses were for promoting sales to, for example, Mexico and South American countries (that is, to any other markets other than USA, Canada and a member state of the European Union).

 

This Item does not apply to approved bodies. Approved bodies are entitled to claim expenses in all markets (except New Zealand, Iran and North Korea) in their applications.

 

Item 9

 

Sections 28 & 29 of the Act define eligible expenses. Section 58 provides rules for when expenses are taken to be incurred.

 

The current section 58(2)(a) rule requiring expenses to be “paid off” is difficult to apply consistently. Most applicants pay for expenses directly as evidenced by banking documentation. However, some applicants claim expenses that are paid by another party (commonly applicant director, partner, related entity) and taken up in the applicant’s profit and loss statement as an expense and balance sheet as a liability. Currently, Austrade allows this type of expense where there is a strong likelihood the applicant will repay the debt to the payer of the expenses, e.g. where a formal loan account exists or where the debt is short term.

 

Claims with expenses incurred in this way are often difficult to assess because it is often not easy to determine the chances of loan repayment and there is a risk loans will be written off or converted to equity.

 

This amendment will require applicants to incur expenses by either paying the expense directly or paying by credit card. This Item simplifies the scheme and confirms the scheme principle that an applicant itself (rather than its associates or any other party) should incur a real cost and ‘bear the risk’ in developing international business.

 

Item 10

 

The EMDG scheme ‘not fit and proper person’ rules under section 87AA of the EMDG Act provide for the non-payment of an EMDG grant if Austrade has formed an opinion, in accordance with EMDG (Associate and Fit and Proper Person) Guidelines 2004 (Not Fit and Proper Person Guidelines), that a person or an associate of the person is ‘not fit and proper’ to receive a grant.

 

Under current scheme rules, where applicants engage EMDG consultants to prepare or to help prepare EMDG claims who are ‘not fit and proper’ persons, these applicants are not subject to the provisions of section 87AA of the Act (in respect of their consultant’s behaviour).

 

The only current circumstance under the Act where an applicant might be affected by the actions of its EMDG consultant is where the consultant is disqualified in terms of section 78 of the Act. This section lists relevant Corporations Act 2001, Crimes Act 1914 and Criminal Code offences.

 

Sections 74 to 79 inclusive of the Act provide that where a claim, prepared by a disqualified EMDG consultant, has been lodged, the claim is taken not to have been made and the applicant is invited to make a fresh application.

 

Item 12 provides that where a claim is prepared by an EMDG consultant deemed to be ‘not fit and proper’, the claim is taken not to have been made and the applicant is invited to make a fresh application.

 

The Minister for Trade and Competitiveness must make guidelines, to be complied with by the CEO of Austrade in forming an opinion, as to whether an EMDG consultant is a fit and proper person - Item 16 refers.

 

To determine whether an EMDG consultant is a fit and proper person, Austrade may need to seek information about that consultant. This Item empowers Austrade to ask for consent to seek such information. If this consent is not provided, section 73 of the Act empowers Austrade to refuse to consider the application.

 

 

 

Item 11

 

Item 10 refers

 

Item 12

 

Refer to Item 10

 

Item 13

 

The operation of the EMDG scheme two-tranche system is explained at section 67 of the Act. Essentially, applicants entitled to a grant of less than the ‘initial payment ceiling amount’ (IPCA) are paid their grant at the time the claim is determined. Applicants entitled to an amount exceeding the IPCA are paid the IPCA amount and then, often many months later and following the setting of the ‘balance distribution date’, are paid the balance of their entitlement. This balance amount will depend on the assessed value of all applicants’ entitlements and will be paid to applicants entitled to a second tranche amount on a pro rata basis.

 

Under the EMDG Act’s current two-tranche payment arrangements, Austrade is unable to pay the full amounts of assessed grants to applicants as quickly as desirable when scheme demand is lower than expected or where additional money is appropriated for the scheme.

 

For example, in some years, it is clear to Austrade once all annual claims are lodged that all applicants will be entitled to their full claim, i.e. the payout factor for the year will be 100 per cent.

 

This inability to pay the full grant amounts as quickly as desirable arises from the interaction of two EMDG provisions, namely (a) grant amounts that exceed the ‘initial payment ceiling amount’ are determined after the ‘balance distribution date’; and (b) the Act’s current section 82 paragraph (a) providing that grants determined after the ‘balance distribution date’ for a grant year and before the following 1 July cannot be paid until that 1 July.

 

This Item amends section 82 of the Act to provide that if Austrade determines the amount of a grant before the 1 July following the ‘balance distribution date’, the grant becomes payable immediately.

 

Item 14

 

This Item provides that applicants whose EMDG consultants are assessed to be a not fit and proper person are entitled to review rights for the decision - refer to Item 10.

 

Item 15

 

Item 4 refers

 

Item 16

 

Item 10 refers

 

 

Items 17 & 18

 

Currently, section 105 of the Act provides that the EMDG scheme administration costs for any financial year must not exceed 5 per cent of the money appropriated by Parliament for the scheme for that financial year.

 

These Items provide for the Minister for Trade and Competitiveness to make a determination from time to time to specify a percentage of the EMDG scheme appropriation for a financial year to fund scheme administration costs for that financial year. This determination will be a disallowable instrument.

 

Items 19, 20 21 & 22

 

Refer to Item 4

 

Item 23

 

The amendments made to increase the maximum number of grants to eight (excluding approved bodies and joint ventures) - refer Items 2 and 3 - and to exclude expenses relating to the promotion of sales to the markets of the USA, Canada and the European Union in grant years six, seven and eight for all applicants except approved bodies - refer Items 7 and 8 - apply in grant years commencing on or after 1 July 2013.

The amendments made to remove event promoters from the EMDG scheme - refer to Items 4, 5 and 6 - apply in relation to grants in respect of grant years commencing on or after 1 July 2013. Guidelines made for the purposes of paragraph 101(1)(b) of the Act that were in force immediately before the commencement of this item have effect after the commencement of this item.

The amendment requiring applicants to acquit claims by individually paying for claimed expenses - refer to Item 9 - applies in grant years commencing on or after 1 July 2013.

The amendments made by Items 10, 11 and 12 providing that where a claim is prepared by an EMDG consultant deemed to be ‘not fit and proper’, the claim is taken not to have been made, applies in relation to the preparation of applications for grants in respect of grant years commencing on or after 1 July 2013.

 

The amendment made by Item 13 enabling a grant to be paid more quickly where the grant is determined before 1 July following the balance distribution date applies in relation to determinations made on or after the commencement of this Part.

 

The amendments made by Items 17 and 18 to remove the limit on administrative expenditure from the legislation and introduce a power for the Minister to set the limit on administrative expenditure by determination, apply in relation to financial years commencing on or after 1 July 2012. The need for this application provision to be retrospective arises from a reduction in the scheme’s appropriation amount announced during the 2012-13 financial year that included a reduction for the 2012-13 financial year appropriation.

 



Part 2 - Amendments commencing 1 July 2013

 

Items 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56 and 57

 

The Act currently provides for joint ventures meeting assessment criteria to be approved and to receive up to five grants for a specified project or activity. Subsection 90(2) of the Act currently provides for approval to expire immediately before the beginning of the fifth anniversary of the day on which the approval took effect.

 

These Items remove approved joint venture rules. No more joint ventures will be approved after 30 June 2013. Joint ventures approved as at 30 June 2013 will be eligible to receive grants until their approval lapses.

 

Item 58

 

The amendments made in this Part prevent further approval of joint ventures after 30 June 2013 apply from 1 July 2013. The Act as in force immediately before the commencement of the Part will continue to apply in relation to joint ventures approved by the CEO of Austrade under section 89 of the Act.  This means that joint ventures that are approved as at 1 July 2013 are entitled to receive grants until their approval expires.

 

An application for joint venture approval that has not been decided immediately before 1 July 2013 is taken to have not been approved by Austrade.

 

An applicant that has had its application for joint venture approval status refused before 1 July 2013 is entitled to a review of the decision to refuse. If the joint venture is subsequently approved, it will be entitled to receive EMDG grants until its approval expires.