June 03, 2020

EMDG - 1st Trance Payment increased to $100,000

Austrade has just announced that the 1st tranche payment for 2019/20 EMDG claims will be increased to a maximum of $100,000.  This is welcomed news as it represents a significant increase from $40,000 which has applied for the past several years.

Following the Federal Government's $49.8m recent additional funding allocation for 2018/19 claims paid in 2019/20, there was an expectation a similar decision would be made for 2019/20 claims.  However, various reviews revealed the grants to be claimed for 2019/20 are expected to be substantially lower than in 2018/19, represented by a significant reduction in travel costs claimed. When the additional $20m that was allocated last year (part of the $60m), is added to the mix, less the impact of the removal of the Export Earnings Test, the gap between approved grants and funding available will be very close.

There is no way of knowing what the final grants will be but our own client reviews revealed that in addition to a dramatic reduction in overseas travel due to COVID-19 has been matched with substantial decreases in expenditure in trade events, overseas representation, advertising and sampling. It is highly possible that the total grants claimable will be less than the available funding, which validates the decision made by Austrade to increase the maximum 1st tranche payment to $100,000.

A total of 193 of the 2017/18 claimants were entitled to receive the maximum grant of $150,000. Also, a total of 476 (including the 193) were entitled to receive grants greater than $100,000.  The number of claimants expected to receive grants greater than $100,000 for 2019/20 claim is expected to be considerably fewer than the 476. Given that there were 3,741 claimants that received grants in 2018/19 for their 2017/18 claims, fewer than 10% are expected to be entitled to receive a 2nd tranche payment in 2020/21.  The maximum $100,000 1st tranche payment is therefore expected to fully pay claims for 90% of claimants, leaving perhaps 300-400 due to receive their 2nd tranche payments of up to $50,000, with an average of $22,961 based on 2018/19 actual payments of 2017/18 claims.

March 31, 2020

EMDG.....gets a major shot in the arm

Today the Federal Government allocated $49.8m to the EMDG scheme to ensure all 2018/19 approved EMDG claims are paid in full. This decision is designed to assist exporters experiencing a staggering drop-off in business due to the COVID-19 epidemic.

Austrade will commence to start paying the funds from 6th April, starting with claims that have been approved for amounts greater than $40,000, where the initial $40,000 has been paid.  100% of the remaining balance due will be now paid from these allocated funds.

Of the remaining claims, those subject to a 'file check' only will be fast-tracked and paid in full.  All other claims subject to review will be processed in turn.

A significant change for 2019/20 claims is that the export turnover test will not be applied. This is a major boost for exporters claiming their 3rd to 8th grant that have experienced a dramatic drop-off in sales due to COVID-19.  This means that the total eligible expenses will be refunded at the full 50% (subject to total funding limitations) and not limited to a percentage of export sales.

What has not been advised at this stage is how payments for 2019/20 claims will be paid in 2020/21. For several years all claims approved were paid up to a maximum of $40,000 and any approved amounts greater then $40,000 were held over until the following June and paid from residual funds.

Given that many claimants have experienced a major drop-off in sales many have also experienced a major drop-off in expenses and it is expected that overall expenses claimed for 2019/20 will be significantly less than claimed in 2018/19. However, since the export earnings test will not be applied more claimants are expected to receive the full 50% grant of net eligible expenses.

In the absence of any additional funding to ensure 100% payment of all approved 2019/20 claims,  Austrade may need to continue with an initial payment and pay the balance from residual funds. An extra $20m was allocated in April '19 for grant payments made in the 2020/21 year. The initial payment may well be increased from the existing $40,000.  Some years ago the initial payment was $70,000. 

March 15, 2020

COVID-19....an unexpected benefit?

COVID-19 will have a major impact on many export claimants!  That is the view of many of our clients recently contacted for their opinion on how severe the impact will be on their export businesses. The overwhelming majority advised that their businesses will take a 'major hit' this financial year. One client involved in inbound tourism advised that all bookings by overseas travel agents and direct overseas bookings had been cancelled, leaving just a handful of forward bookings by local tourists, not enough to keep his business open. Another client (sporting goods) advised that export sales had fallen significantly since late January and were predicted to fall by at least 50% in the months to June 2020.....and that was two weeks ago. Many developments have taken place since then.

The story has been the same for the majority of clients contacted.  However, one client advised that his trade into China has increased, and expects 2020 to be a record year!!!!

In spite of the gloom conveyed by the majority of clients there may be a 'silver lining' for many. For several years the grants approved exceeded by a significant margin the level of funds available to Austrade to fully pay all claimants. For many, they received an initial payment of $40,000 for claims paid in 2018/19 and then 24.6% of any balance due over the $40,000 already paid. Claimants with approved claims of $150,000 were paid a total of just $67,057 in the 2018/19 FY. Given that the Federal Government advised an additional $60m in May 2019 would be allocated in 3 x $20m 'top-up' amounts for grants paid over the next three years, the estimated 2nd payment in June 2020 is not expected to exceed 40% of the balance due. In other words, claimants with approved grants of $150,000 may expect to receive a maximum of $84,000 versus $67,057 paid during the 2018/19 year.

COVID-19 may not have any impact on the payout by Austrade for the remainder of the 2019/20 FY, unless the Federal Government allocates some of the $1b just set aside to assist "those regions and communities that have been disproportionately affected by the economic impacts of the Coronavirus, including those heavily reliant on industries, agriculture and education".

The impact on grants payable during the 2020/21 FY may be significant, due to the following:

  • Many exporters will be claiming their 3rd to 8th claim and as such their grant is limited to a percentage of eligible export sales or 50% of eligible costs, whichever is the lower. Many claimants receive grants based on this method. A dramatic reduction in export sales receipts = a significant reduction is grants receipts.

  • Overseas travel for the remainder of the 2019/20 FY will be severely restricted, with many exporters anticipating no overseas travel until late in the year.

  • For trade shows booked months ago, not much can be done, but several exporters spoken to are backing off from signing up and paying for 2020/21 FY trade shows until the current crisis is over.

  • Existing agreements with Overseas Representatives and Marketing Consultants are now subject to renegotiation until such time as the market conditions change.

The impact of the conditions above to the total expenditure claimable will be significant When coupled with the application of the sales performance assessment, the net outcome for many claimants due to receive amounts greater than $40,000 will be to receive a significantly higher second payment, when compared to the outcomes during recent years.  It is highly possible that the total grants received could be close to the 100% approved. This figure could be further assured if the Federal Government allocates funds from the $1b special funding package as referred to above. Based on current estimates a total of an additional $30-40m would be required to fully pay claimants to the end of June 2020 and a much lower amount would be required for 2020/21 year.

April 03, 2019

EMDG - Treated like a Leper.

Tuesday was a sad day for the EMDG Program! The Federal Coalition Government Treasurer presented the Annual Budget and advised that a modest additional $60m has been allocated to top-up the EMDG at $20m per year (3 years).

For several years the EMDG program has run out of funds with more and more claimants receiving significantly less than the 50% expected. In 2017/18 some 1,407 claimants whose approved grants exceeded more than $40,000 each, received their initial $40,000 but just 29.24% of the remaining grants due.  For claimants due to receive the $150,000 maximum received just $32,164 of the $110,000 balance.

The shortfall in funds for 2017/18 was just over $45m.  The final payouts during 2015/16 were 72.66% and 64.5% for 2016/17.  The reduction to 29.24% during 2017/18 was extraordinarily low and totally unexpected.  But the news is a lot worse for 2018/19. Estimates are that the final payout in June '19 ranges from 10% to 20% with many experts believing it will be closer to 10%.

How did this happen, why has it been allowed to happen?

For several years the Export Consultants Association Incorporated (ECAI), the members of which are EMDG Consultants assisting in excess of 70% of all EMDG claimants, has been lobbying the Federal Government for more funding for exporters. The success of the program over many years is well documented, generating export sales revenue in excess of $31 per each $1 grant paid and as reported by KPMG in their study, which reads:

 

"KPMG found that each EMDG dollar generates an economic benefit of $7.03 when industry spillovers and productivity gains are taken into account. The scheme effectively redistributes productive resources from Australian taxpayers (including firms) to new and emerging exporters".

The success of the program is growing year on year. The number of claims lodged for 2015/16 increased 6.6% on 2014/15 , 6.6% in 2016/17 on 2015/16 and 8.1% in 2017/18 on 2016/17.This growth is expected to result in a funding shortfall exceeding $60m by the end of June '19. ECAI plus several industry groups, exporters and individual EMDG Consultants made representations to the Federal Government during recent months all detailing the same message.......more funds are needed to pay 100% of approved grants.

Nothing has been approved for this financial year.  The sad fact remains that at the end of June '19 there will be an expected funding shortfall exceeding $60m and if this year can be compared to last year, at least 1,407 claimants will miss out receiving 100% of their approved grants.

Going forward the position is helped marginally by the extra $20m per year over three years.  If the number of claimants increase as in the past then a similar $60m shortfall will be the result for 2019/20 potentially increasing to $100m plus by 2021/22.

Added to the above is the likely outcome that Austrade will be forced to decrease the initial grant payment from 1st July '19 to spread the reduced payments over a larger number of claimants.  At present all approved grants for less then $40,000 receive 100% payment once the claim is approved.  Those claimants due to receive in excess of $40,000 receive the $40,000 and wait until the end of June '19 for their second and final payment.  A possible outcome is that Austrade will reduce the $40,000 maximum initial payment from 1st July '19 to between $20,000 and $30,000. A total of 940 claimants received grants of between $20,000 and $40,000 during the 2017/18 year. This means that 2,357 claimants would receive less then their approved entitlements but at least the 'bad result' is spread over a much larger base previously shared by just 38% of claimants.

The only good news, if it can be called that, is the additional $60m allocated at $20m per year over the next three years.  What happens after that is unknown as the forward estimates show that the grant funds set aside revert to current levels.

With the Federal Election next month there has been no indication by Labor that they will change the $60m, up or down, should they win power. It appears to be a done deal unless exporters current plight is revisited soon.

June 27, 2018

EMDG - 2nd Tranche Payment 2016/17 Claims

Yesterday was an extremely disappointing day for EMDG Claimants anticipating receipt of their 2nd tranche payment for 2016/17 claims.  The final payout factor applied was just 29.24% of the balance due, a significant decrease from earlier projections of between 40-50% and considerably less than the 64.5% paid in June '17 and 72.66% paid in June '16.

 

This is the worst result ever for the scheme.....although 24.42% was paid as the 2nd tranche in June '08, the initial payment was $70,000, which meant that a claimant expecting to receive the maximum of $150,000 actually received $89,536 or 59.69% whereas for 2016/17 claims, a maximum of $40,000 was initially paid and the $110,000 balance paid as 29.24% or $32,164 giving a total of $72,164 or 48.11% of the total expected grant.  So, although in 2008 the payout was lower at 24.42% the overall grant paid was higher by $17,372 ($89,536 less $72,164).

The EMDG program has been too successful......! According to Austrade, claimants achieved $4.1 billion in export sales for the 2016/17 year which based on a total grant payout of $131 million equates to a return of $31 in sales per $1 grant paid. This is an exceptional return on the Australian Government's investment in the scheme and it was only a few years ago that the return was $7 per $1 invested.  Yet the EMDG scheme received no extra funding in the May '18 budget and the forward estimates have remained unchanged.

 

Why, when the scheme is so popular and claimants achieving such extraordinary returns for the country are they treated with so much disrespect?

There were 3,771 claims lodged for 2016/17, an increase of 6.6% up from 2015/16, which in turn was 6.6% up from 2014/15. It is highly likely that the number of claims lodged for 2017/18 will be greater than for 2016/17 placing greater pressure on the funds available. Based on the outcome of the 2017/18 payments it is highly likely that 2nd tranche payments in June '19 could be much lower than the 29.24% paid for 2016/17 claims.

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May 08, 2018

EMDG - Forgotten.....AGAIN!

The budget introduced last night in Canberra contained no increased funding for the EMDG program. That is a tragedy!  The program has been grossly underfunded for several years and in spite of the continued pleas from exporters the Federal Government has once again decided to ignore them.

Currently, $137.9m is allocated, which includes 5% administration costs.  The program had been funded with $150m after the Howard Coalition came into power in the mid 90’s, previously the program had no limit and grants paid totalled approximately $230m. The $150m had remained until the Labour Government reduced it to $125m, after introducing a one–time injection of $50m, before the Coalition, whilst still in opposition, pledged a further $50m to the program, if they were elected, spread over four years, which is where we are at today.

Furthermore, what is very concerning is that the forward estimates show $137.9m allocation per annum up to and including 2021/22.  Based on this, it would seem that the Federal Government, although committing to the program for several more years, is not planning to to increase the yearly allocation during this period.

As included in Austrade’s website just last month, the program is extremely popular with a 6.6% increase in claims for 2016/17 versus 2015/16.

The biggest losers in this program are exporters with claims greater than $40,000 grant. Under present arrangements exporters receive up to $40,000 as their initial payment and any balance held over until the end of the financial year to be paid out of available funds. In June ’16 the percentage payout was 72.6% and in June ’17 it was 64.5%. Unofficial estimates for June ’18 have been quoted at anywhere between 40-60%. The final payout depends on Austrade’s ability to process a significant backlog of claims before the June cut-off date when the payout amount is determined.  Keeping in mind that 2016/17 claims were up 6.6% on the previous year and if the average grant amount is much the same as in previous years, it is highly possible that the final payout percentage could be significantly less than last year.

The impact of a greatly reduced lower payout percentage for many is extraordinary. A claimant entitled to a maximum grant of $150,000, receives the initial $40,000 and then in June, if the payout factor is 50%, receives $55,000 of the $110,000 due, giving a total of $95,000 of the $150,000 approved/expected.  Instead of a 50% grant of the total expenses, the actual is just 31.67%.

April 30, 2018

EMDG Popularity continues to grow

Austrade has advised that the EMDG scheme is gaining in popularity with exporters. For the 2016/17 year first time claimants are up 13.6% on 2015/16 and overall the number of claimants of 3,771 are up 6.6% on 2015/16.

Export sales of all claimants exceeded $2.2 billion for 2016/17 with an average of $591k per exporter, a remarkable outcome considering that the total EMDG payments will total around $131 million. Interestingly, for each grant dollar paid equates to $17 in export sales....an outstanding performance by exporters. Just a few years ago the performance was 9 to one.

The more popular the EMDG scheme becomes the greater the problems for those claimants entitled to receive grants greater than $40,000. The fact is that the budget for the scheme is just $131 million after deducting running costs. This amount has not been sufficient to pay 100% of grants assessed in recent years. The increased number of claims lodged for the 2016/17 year will again put increased pressure on the $131 million. Everyone entitled to receive greater than $40,000 grant will receive an every decreasing amount from the available pool of funds.

The simple solution is for more funds to be made available. Unfortunately, the Federal Government has consistently rejected the pleas from Austrade and exporters alike to inject more funds into the scheme which has proven and continues to prove that it is one of the most successful export incentive schemes ever.  After-all, the scheme has been in existence since the early 1970's.....and is fast approaching its 50th anniversary.

April 11, 2018

EMDG EOY almost here

Just over 10 weeks remain before the end of the EMDG year.  Now is the time to collate and review EMDG paperwork to ensure claims can be lodged early in July '18.

As we've advised time and time again, it is important to lodge claims early to ensure prompt assessment and payment. Claims lodged in July are generally processed within 60 days, although a week turnaround is common. Not many claims are lodged in July, hence why Austrade respond promptly. Claims lodged later, particularly in the months of October and November can experience significant delays. 

Given that claimants often take advantage of the extended lodgement program, Austgrant can lodge claims up to the end of February '19.  Whilst this is an option to all our clients, the downside is that claims can be sitting around for several months before Austrade can begin their assessment. Potentially, this can extend to May to Aug '19.

Our suggestion, call us now to arrange a meeting to start the collation process.

April 08, 2018

USA Virtual Presence

We are often asked by clients how they can effectively market in the USA without having an on-the-ground commission agent, distributor, representative or one of their own people transferring from Australia and living in the USA for a while.

Once we explain that for minimal cost it is possible to set up a virtual presence centered on the establishment of phone/fax lines that can be linked back to the Australian telephone numbers and or email, it suddenly becomes very interesting.

For a very modest monthly cost it is possible to establish 1 800 numbers in the USA that can be added to marketing material and when the numbers are called, can either be set to divert to Australian telephone/fax numbers and or a recorded message advising that the 'office' is temporarily unattended and any left message can be immediately emailed as a Voice File.

For further information contact Ray Gillman on 02 9943 0729 or 0418 255487.

April 01, 2018

Travel 1st Class for Economy Class prices

The thought of flying at the front of a plane for a long overseas flight is a dream for most and generally have to settle for economy class purely because of the cost. After all, you do arrive at the same time, but also after spending up to 20 hours with your knees under your chin, it is time to spend a couple of days unwinding (physically) before the business purpose of the trip can be undertaken.

All of that can change.......

A client of Austgrant is in the business of teaching travellers on how to fly first or business class for the cost of an economy class ticket, using purchased points and or cash, and at the same time pick up many travel perks along the way, including accessing 1st Class lounges, at minimal or no extra cost.

This is a unique service and having seen first-hand the savings can be achieved, the results are truly amazing.

For further information, please contact Ray Gillman on 02 9943 0729 or 0418 255487.

March 01, 2018

EMDG - 2nd Tranche Payment

The close-off date for lodgement of 2016/17 EMDG's was 28 Feb '18. Feedback received indicates that many claims were lodged during the Dec-Feb period by Quality Incentive Program (QIP) Consultants under Austrade's Extended Lodgement Scheme.  The impact of this is that those claims will take time to be processed as Austrade have a backlog of claims lodged prior to the 30th Nov deadline yet to be processed.

Based on comments made by many EMDG Consultants it is highly likely that the total value of EMDG's claimed for 2016/17 exceed those lodged for 2015/16.  That being said, the 2nd Tranche Payment for 2015/16 claims was 64.5% of grant amounts exceeding the base of $40,000.  The 2nd Tranche Payout for 2016/17 claims is predicted to be in the 50-60% range.

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