Peter Garrett (Kingsford Smith, Australian Labor Party, Shadow Minister for Climate Change, Environment and Heritage) Share this | Hansard source

I rise to speak on the Tax Laws Amendment (2007 Measures No. 5) Bill 2007, which seeks to implement a wide range of arrangements, including the government’s long overdue film package. This omnibus bill contains a number of critical amendments. However, it is the reform of the film production tax concessions associated with the government’s long overdue film package that I will specifically address in my remarks.

I note that schedule 1 of the bill, ‘Tax preferred entities (asset financing)’, is specifically designed to encourage further investment in infrastructure projects like transport infrastructure, telecommunications facilities, hospitals, educational facilities and public housing. These changes will no doubt facilitate an increase in infrastructure investment. However, it should be recorded in the House that we have actually had to wait eight long years for this government to act on the recommendations of the Ralph review. Frankly, that delay is inexcusable given the importance of the measures contained therein.

I note that schedule 5 seeks to exempt income from income tax for the Prime Minister’s Prize for Australian History and the Prime Minister’s Prize for Science. Labor certainly supports these amendments strongly and considers it entirely appropriate that an exemption of this kind ought to apply when prizes of this sort are conferred. Schedule 10 contains the government’s film production tax concessions, which I will address later.

As a matter of some importance and relevance, Labor has long argued that changes are needed to the R&D tax concessions that are identified in schedule 11 amendments. Here the amendment is to extend the premium 175 per cent research and development tax concessions to companies belonging to a multinational enterprise group for additional research and development expenditure carried out in Australia on behalf of a foreign company—in that case, above a rolling three-year average of expenditure—and we take the view that this should encourage further research and development by multinational firms in Australia.

More generally, the government’s track record on research and development is poor. During the 11½ years of the Howard government, the real average annual growth rate in business R&D has been 5.7 per cent—a miserable 5.7 per cent, it has to be said, given the amount of available access to capital and investment that is out and about. When Labor was last in office this figure by comparison was 14.5 per cent. Additionally, we note that Australia’s research and development expenditure is about 0.5 per cent below the OECD average. That certainly is a situation that needs to be addressed. It should not have been allowed to lag at those levels for this period of time.

Labor has a long and proud association with the arts in this country. In particular, Labor recognises the enormous contribution the film and television industry has made to the cultural life of the nation. Film and television are at the forefront of embracing new and emerging technologies. It is a contemporary medium of creative expression that impacts upon the lives of many Australians. I particularly had the pleasure recently of visiting Australian Centre for the Moving Image in Melbourne’s Federation Square. Some members will be aware of that very good institution. They have the Pixar exhibition on display there, and they are responsible for some of the best entertainment that we have seen on our screens in recent years. It impressed me very much. It confirmed that really significant and exciting opportunities are offered by developments in digital animation, and particularly how screen based art in this instance captures the imaginations of both young and old. We, of course, have our very own success story in the world of digital production—the Animal Logic company, which contributed to the inspiring success of Happy Feet. I think some visitors in the gallery may be aware of Happy Feet and may have seen the marvellous work and animation that Animal Logic contributed to there. Having visited the facility, it is very clear to me that here in Australia we do have the capacity and the ability in these innovative and cutting-edge technologies to produce digital productions that are in the same league as those that overseas producers like Pixar have done. With the right investment framework in place and the right support mechanisms for research and development, there is no reason why more Australian companies cannot compete with the world’s best. As the film and television industry provides employment to around 50,000 people in production, distribution, exhibition and retail, it is critically important that we encourage and support a healthy industry.

Labor has substantially driven film policy in the past in Australia. Under the Whitlam government, bills were introduced to, amongst other things, establish the Australian Film Television and Radio School, and in 1988 Labor formed Film Finance Corporation Australia. Further initiatives that were instituted by Labor governments include establishing Film Australia as a wholly Commonwealth owned corporation—entirely separate from the AFC—and redefining the role of the AFC to concentrate on development, innovation and marketing and development as well as providing advice to government on film matters. Our film and television industry is widely respected around the world for its innovative and original productions. Our actors, technicians and directors constantly perform well above the mark—punching well above their weight, as the expression goes—in the hugely competitive film market. Only last weekend, we saw Cate Blanchett recognised at the Venice film festival for her work in I’m Not There. Her portrayal of Bob Dylan left fans and critics astounded at her versatility and her capacity. It is a product in part of Cate’s great talent—and we in the House offer our congratulations to her—but no doubt also in part because of the training she received at the National Institute of Dramatic Art.

Sadly, the sustained individual success of Australian filmmakers masks an industry that has experienced some real difficulties. Schedule 10 of the amendments represents long overdue reform of the sector, which has not been able to fulfil its clear potential. On the Howard government’s watch, the Australian film and television industry has found itself in the doldrums. Production activity is at record lows, drama levels are falling to critical levels, Australia’s skilled actors, technicians and filmmakers are struggling to find consistent work and private sector investment is at perilously low levels. The latest industry figures that were compiled by the Australian Film Commission in its report National survey of feature film and TV drama production 2005-06 paint a worrying scenario. A summary of the findings shows the value of production activity totalled $361 million but this represented a fall of 33 per cent on the previous year’s total, and it was substantially down on the five-year average of $533 million. Total budgets and value of television drama productions were also down on the five-year average—607 hours in 2005-06 compared to the five-year average of 667 hours—and private investment contributed just seven per cent to the Australian and co-production slate.

Labor has been critical of the government for its delay in reforming the taxation concessions for Australian film and television productions. The government stalled and announced review after review when it was plain to see that the industry was in dire need of financial reform. When in May 2006 the then Minister for the Arts and Sport announced a review of the full range of government support measures for funding films in Australia it was high time that we looked at the issue of the health of the film industry more generally and at the issue of reviewing other matters, including 10BA and 10B tax incentive schemes. Certainly, the current arrangements were not providing adequate levels of private sector finance and production was declining. There was also great concern about the inability to attract big budget feature productions to our shores.

We called for reform in the sector and for support. At last, as announced in the most recent budget, some of those matters have been addressed by this bill, which should go some way towards addressing the dearth of private investment in film and television. A number of principal changes were identified: the introduction of a refundable tax offset for Australian expenditure in making Australian films, which certainly is an important and necessary reform; increasing the refundable film tax offset for Australian production expenditure from 12.5 per cent to 15 per cent; introducing a 15 per cent refundable film tax offset for post, digital and visual effects production in Australia, the PDV offset; and phasing out the existing tax incentives provided to investors in Australia.

The new offsets are, as a whole, good news for the industry. In particular, the 40 per cent rebate—that is the refundable tax offset I referred to earlier—has received widespread support, and it is hoped that it can generate significant levels of new production. Labor have been calling for reform of this kind for some time and support these moves, but it will be critical for us to assess the implementation of the reform package, especially to make sure it does not negatively impact on certain sections of the industry, including documentary filmmakers and independent producers.

The original intention of the producer rebate I have referred to was made clear in a press release by Ministers Brandis and Coonan on 8 May, which stated:

It provides a real opportunity for producers to retain substantial equity in their productions and build stable and sustainable production companies …

And yet here there are some question marks, some of which are outlined in the amendment we are considering today, about whether the government’s proposed legislation will deliver what the ministers signalled.

There has been a high degree of anxiety and concern amongst the independent production sector because of the impacts of some of these changes, especially in relation to the opportunity of commercial broadcasters to access the other component of the refundable tax offset, namely a 20 per cent offset for documentary television series, telemovies, children’s television and animation. The recent report by the Senate Standing Committee on Economics highlighted a number of these concerns and heard evidence from industry representatives including the Screen Producers Association of Australia, the Media Entertainment and Arts Alliance and the Writers Guild. Of particular concern to them is the capacity of commercial producers to access the 20 per cent producer offset.

Each of the commercial free-to-air licensees must broadcast a minimum transmission quota of 55 per cent Australian programming between 6 am and midnight. Within this requirement there are minimum subquotas for Australian adult drama, documentary and children’s programming. Labor has noted the concerns raised, including the possibility of the 20 per cent producer offset being factored into the pricing of programs supplied by independent producers, and has moved a second reading amendment to address those concerns.

Concerns have also been raised that access to the offset for qualifying programming will create a strong incentive for television networks to move production in house. In-house production would provide broadcasters with direct access to the offset. Alternatively, they will certainly have strong opportunities to leverage their negotiations with independent production companies to access the offset in relation to the production of qualifying programming. This may well determine the price of those programs in time. These are particularly important issues to consider and Labor takes them very seriously.

Further, the Senate committee found an anomaly in the bill which related to the time an animation must run to qualify for the offset. The bill stipulates a minimum requirement of 30 minutes; most children’s animation programs run for less—usually 15 minutes. The committee recommendation that the bill ‘be amended to allow 10- or 15-minute animation episodes to be categorised as a series for the purposes of qualifying for the producer offset, provided that a total commercial hours threshold is met’ is necessary.

Labor’s second reading amendment addresses the concerns raised by independent producers as well as the delay in introducing other reforms to the taxation treatment of infrastructure financing. The second reading amendment moved by the member for Prospect in part provides that the House:

(2)

recognises the producer offset, incorporated within Division 376 of the bill, could potentially impact independent program producers;

(3)

recognises the issues raised by the independent production sector in relation to Division 376 of the bill, and recognises the independent producers’ concern at the  possibility that the bill may not allow producers to retain substantial equity in their productions and build stable and sustainable production companies;

(4)

notes  the contribution of the independent production sector as one  source of innovative, diverse and culturally vibrant Australian content, and recognises that Australian independent producers should have every opportunity to retain substantial equity in their productions and build stable and sustainable production companies; and—

critically—

(5)

notes the need to monitor the operation of this Bill and the need to conduct a review of the viability of the independent production industry to commence within 12 months ...

It is unarguable that the independent sector plays and has played a critical role in the development and growth of the film and television sector in this country. It has been described as the ‘engine room’ of the industry, where new and emerging actors, writers and technicians can ply their craft and develop their skills.

But not only is the independent sector the engine room of the film and television industry; it is also the nursery for Australia’s talented actors, directors and technicians. The House would be well aware that many of today’s world-renowned filmmakers got their start in the independent sector. Actors like Russell Crowe and Geoffrey Rush, directors like Gillian Armstrong and George Miller, and technicians like Dean Semler, Don McAlpine and Russell Boyd—all now worldwide recognised artists of stature—honed their craft in Australia’s independent sector.

Without the training and mentoring provided by the independent sector, Australia’s film and television industry would not be the engine room for this future growth that it is today. The importance of its role as a training ground has only increased following the Howard government’s decade-long neglect of that other great film nursery, the ABC. We say to Australians: where would we be without shows like those produced by Kennedy Miller, such as Bangkok Hilton, or by Grundy Television, such as Neighbours? We would be in a different country and not as enriched, I think, by the experience. Therefore, a thorough review to assess the impacts of the new offset on the independent sector and the situation that the sector finds itself in as a consequence of these changes should be undertaken within 12 months.

I raise a further concern, which has been ignored by the minister and the government, relating to the government’s treatment of its Film—Licensed Investment Company scheme, or FLICs, which it introduced in 1999 and extended in the 2005-06 budget. FLICs was designed to increase the level of private investment in the film industry by allowing licensees to raise $10 million in concessional capital per year, with investors receiving a 100 per cent income tax deduction on the funds invested. The sole FLIC licensee in 2006-07, which had raised $10 million, now finds itself lost in transition. The FLICs legislation states that it can only invest in films with a 10BA provisional certificate; however, the government announced the scrapping of 10BA in the last budget, initially as of the end of the last financial year.

While the minister has now changed his tune to allow access to 10BA up until the passage of the new bill, the lack of communication and transitional arrangements from the government has left the FLIC scheme as dead as a dodo, with a number of prospective film projects languishing on the drawing board. This is not satisfactory. The government has abandoned this scheme. It seems to be trying to wash its hands of any responsibility. While there have been transitional arrangements for the government’s film bodies, the sole FLIC licensee now has nowhere to go. And the film industry misses out on $10 million in private investment. This is a clear oversight that I hope the government can address—and it should. If the government is serious about film investment in this country it needs to look at this oversight.

Labor support this bill because we are committed to backing the Australian film and television industry. Film is one of the most powerful contemporary creative mediums. It is capital and talent intensive. Australian creativity and stories are more often experienced through film than through many other art forms. Whilst we support the new tax offset regime and believe it should encourage greater private investment in the industry, there are a number of unaddressed issues which this government has ignored and which we have referred to hitherto in the second reading amendment.

The minister has not properly or adequately addressed the independent sector’s concerns. Labor has considered them closely. A Labor government would review the impact of the legislation within 12 months, should we prevail at the upcoming election. It is of some concern that the government also seems to have completely ignored the plight of the sole FLIC licensee, thereby condemning $10 million of vital private investment to the scrapheap. This is clearly not the position of a government that has an eye on the future. Our talented film and television production industry deserves much more. The measures proposed in the government’s film reform package are long overdue. They were called for on numerous occasions by the many diverse components of the film and production sector and with a strong sense that Australia’s culture in the future is very much at stake. (Time expired)

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