Successful exporters often cite the Export Market Development Grant scheme as a crucial factor in entering markets overseas. Rebecca Spicer checks the guidelines to see who can apply, what recent changes to the scheme mean, and how the grants benefit exporters.
The Export Market Development Grant (EMDG) scheme is an Australian government financial assistance program for new and existing exporters. Administered by Austrade, the scheme is aimed at encouraging SMEs to develop export markets by reimbursing up to 50 percent of eligible export promotion expenses above $15,000.
So who is eligible for a grant, how much can they get and how do they go about it?
In the 2005–06 financial year the total EMDG budget was $170.4 million and 3,485 grants worth $137.1 million were paid to SMEs under the scheme. Only businesses with a turnover of $30 million or less per year can apply for the grants, leaving them largely open to the SME sector. And according to Margaret Ward, general manager of EMDGs at Austrade, around 80 percent of recipients in 2005–06 were small businesses with an annual income of $5 million or less.
Eligible businesses can claim expenses (above $15,000) incurred through export promotion activities undertaken during the financial year before the application period. Those applying for their first grant can claim expenses incurred over the last two years.
Some of the main promotional activities businesses can claim include overseas representatives, marketing consultants, visits to overseas markets, communications, free product samples, trade fairs, seminars, in-store promotions, promotional literature and advertising, and bringing overseas buyers to Australia.
And why does it just cover promotional expenses? “Funding export promotion activities encourage businesses to engage in the types of activities that are most likely to result in export sales,” says Ward. “By partially reimbursing export promotion expenses already incurred by businesses (above a $15,000 threshold), the EMDG scheme also encourages businesses to make a commitment to exporting activities.”
“The existence of funding for export promotion encourages businesses to consider exporting when they may not have otherwise considered it, or are constrained by the risks associated with marketing overseas,” adds Ward. “EMDGs assist with cash flow which is often critical for small businesses embarking for the first time on export.”
Results of survey research undertaken for the 2005 review of the EMDG scheme revealed small business EMDG recipients are spending between 14 and 32 percent of their total costs on promotion, with between nine and 24 percent of this being on export promotion.
The survey also revealed spending on export promotion is considered more important, particularly by smaller businesses, than other business activities. More than 50 percent of EMDG recipients indicated that if extra funds were available, they would prefer to spend these funds on export promotion as opposed to other activities such as upgrading facilities, domestic marketing, research and development and production.
The maximum grant for eligible applicants is $150,000 per year, subject to funds available in the scheme, and businesses can claim a maximum of seven grants.
On receiving an application, Austrade assesses it and determines the possible grant entitlement. All businesses can expect their application to be audited, and they may be contacted over the phone or through an on-site visit by an Austrade grants auditor. Dianne Katra, EMDG consultant with Export Solutions, warns it’s not like tax audits where only a certain portion of businesses are audited. “Every single EMDG claim gets audited by Austrade in some way, shape or form,” she says.
And grants paid are regarded as assessable income for taxation purposes, but GST doesn’t apply to grants under the EMDG scheme.
E.M.D.G. Eligibility
The rules of the EMDG scheme are outlined in the Export Market Development Grants Act 1997. Some of the key eligibility criteria have already been mentioned, but others include:
• applicants must be the principal—you must own the product/service you are promoting (some exceptions apply);
• you must have promoted your product or service for export; and
• your product or service must be mostly Australian-made or be of Australian origin.
In June this year, the government made a number of legislative changes to the EMDG scheme which:
• continue the EMDG scheme until the end of 2010–2011;
• increased the amount that can be claimed for overseas visits to $300 per day;
• provide flexibility for some applicants in regard to ownership of the product for export;
• streamline the Australian origin rules for goods promoted for export;
• allow applicants to claim promotional expenses incurred to increase their return from the disposal of intellectual property and know-how to any foreign resident, including a related company;
• cap the annual amounts that can be claimed as expenses for overseas representatives at $200,000 and for marketing consultants at $50,000, with each expense category claimed separately;
• limit the eligibility of cash payments to $10,000 per application; and
• remove export earnings criteria from calculation of grant entitlements.
Katra believes that although some of the criteria is straightforward, establishing eligibility can be complicated for some businesses, particularly when it comes to business structure and what constitutes ‘Australian-made’. Export consultants can be helpful here. “We sit down with them and go through their company structure, to make sure they’re eligible and can claim everything that’s available to them.”
For example, Katra advises very small companies that might have some synergy with one another, such as local businesses in a popular tourism area, could form a marketing cooperative and apply for the grant together, so their combined marketing spend is greater than $15,000. “It gives economies of scale and the group can lodge a single claim,” she says.
Businesses can also check their eligibility using the online eligibility questionnaire on the Austrade website at www.austrade.gov.au/exportgrants
Having established your eligibility, Austrade recommends first-timers register for the EMDGs online (www.austrade.gov.au/exportgrants/howtoapply). Austrade will confirm your registration in writing and provide an application kit to assist you with your application. Businesses that have already registered with Austrade, or received a grant the previous year, will automatically be mailed an application kit.
Applications for this year’s round of grants opened July 1 and will close November 30, 2006. Austrade says businesses should get in early with their applications because around 80 percent of applications lodged before November are paid within eight weeks, but applications lodged in November may take up to seven months to be processed. It’s also worth noting for next year that most businesses lodging their application before September 30 will receive their grant within four weeks.
Austrade holds coaching workshops Australia-wide throughout the year to help businesses with their grant application. Details of sessions can be found online at www.austrade.gov.au/exportgrants/coaching
For businesses not confident about preparing their own application, Austrade provides a list of ‘best practice’ independent grants consultants to assist, which can be found on their website.
Given their experience and knowledge of the scheme, consultants can more quickly and easily determine a business’s eligibil
ity and how to maximise their client’s return. Katra likens it to doing your own tax return. “You can do it yourself but you might not claim everything you can, or you might get it wrong altogether.”
Export Solutions, like some other consultants, offer a ‘no grant, no fee’ service. “So it doesn’t matter whether it takes us 10 hours processing their claim or 100 hours, we’re just getting a percentage back of what they actually get as a return at the end of the day,” Katra explains, “and they don’t pay us anything until they get their money back; it comes out of the rebate.”
Overall, Ward advises that planning is key. “It’s important that businesses plan their exporting marketing activities as part of their overall business planning, and in doing so plan activities in a way that will assist them to make best use of the EMDG scheme.”
