The government-sponsored Export Market Development Grant (EMDG) scheme seeks to assist small and medium (SME) enterprises to compete in international markets by reimbursing up to $150K of eligible expenditure associated with developing export markets. This can include up to $50K in intellectual property (IP) related costs including renewals and IP insurance.
What is the EMDG?
The EMDG scheme is administered by Austrade and can reimburse 50% of eligible export activities up to $150K to entitled Australian businesses.
These expenses can include:
- Overseas representation costs such as salaries, travel, rent and relocation costs;
- Engagement of marketing consultants;
- Costs of marketing visits such as travel, accommodation and meal expenses;
- Communication costs such as ISD/IDD calls;
- Costs associated with providing free samples to potential buyers;
- Participating in overseas trade fairs, seminars and in-store promotions;
- Promotional literature and advertising costs such as domain registration, website development and printing costs;
- Costs associated with bringing potential buyers to Australia and
- IP registration, renewal and insurance costs.
It is crucial to have detailed supporting documentation in order to successfully receive an EMDG grant. Supporting documentation is not limited to receipts/invoices; but can include items such as email correspondence, agreement letters, contracts and internal reports.
Am I eligible?
There are detailed guidelines as to the eligibility of applicants to ensure the scheme does in fact benefit appropriate SME’s only. This includes eligibility criteria such as:
- having an annual income of no more than $50M for the financial year preceding the grant year;
- being the principal owner of the Australian goods or services;
- being an Australian individual or entity.
Some other noteworthy conditions are:
- a minimum total spend amount of $20K on eligible activity;
- the exclusion of costs relating to business with Democratic People’s Republic of Korea (North Korea), Iran and New Zealand and
- ineligibility of disqualified applicants.
Disqualified applicants are classified as those who have certain outstanding criminal convictions, persons under insolvency administration, non-residents or non- citizens of Australia or persons who are not deemed to be ‘fit or proper’ individuals.
IP expenses & the EMDG
Protecting your IP rights overseas can be a timely and costly process therefore, the EMDG scheme provides a cost category to cover up to $50K of costs associated with granting, registering or renewing IP rights under a foreign law. These expenses can be incurred in Australia, so long as it is for securing rights overseas. If a business chooses to obtain IP insurance, the premium costs for worldwide protection may also be claimable under the EMDG.
These costs are eligible only if they are done for promotional purposes, i.e. there is documented intent that the IP or ‘know-how’ will be used overseas to develop an export market for the good/service.
How many grants can I get?
Current legislation states that eligible Australian businesses can claim up to 7 grants in the business life.
However, after the second grant year an entity is only eligible for subsequent grants if their export activities meet a performance measure test. These performance measures are used as a means for Austrade to determine the fiscal benefit Australia stands to receive by supporting the export activities.
An entity can opt to be measured by one of two options. These options are:
- The Export Performance Test –applicants will receive the lesser of 50% of total eligible expenses or a portion of relevant export earnings. The portion of export earnings depends on the grant year and decreases from years 3 through to 7.
- The Australian Net Benefit Requirement –applicants must prove that their eligible activity can reasonably be expected to provide a commercial return in the foreseeable future. If this requirement is met, applicants may receive their full eligible grant amount.
Once an applicant opts for a particular testing measure, they cannot revert to the other testing option during the grant year if they are deemed ineligible against that particular testing method.
How are payments made?
Eligible EMDG applications are paid out by Electronic Funds Transfer (EFT) using a split-payment system. The initial tranche is paid out immediately after approval and the final payment is made at the end of the current financial year.
The initial tranche varies year to year and is dependent on total funds allocated to the scheme. It must also be noted that final payments may not be paid out in full if the program is likely to go over budget. Therefore, it would be wise for businesses not to base their financial strategic decisions upon the basis that they receive their full grant entitlement.
It is unlikely that grants do not get paid out in full, however it cannot be guaranteed due to factors such as the size of the grant pool, number of applicants and the total amount of an individuals grant.
What is the deadline for applications?
Applications are open from 1 July and must be lodged within 5 months from the end of the income year and are assessed on a ‘first come, first served’ basis.
It must be highlighted that each application does get audited prior to approval so it is essential that applicants follow good documentation procedures for a successful claim.
Future news
Currently, the ‘Export Market Development Grants Amendment Bill 2013’ has been introduced to Parliament. This bill includes the following proposed changes to the EMDG Act:
- Increasing the total number of grants to 8 in a business life
- Exclude expenses relating to the promotion of sales to the USA, Canada and the European Union in grant years six, seven and eight
- Prevent further approval of joint ventures after 30 June 2013
These changes are yet to be actioned. Any further news will be posted if and when there are any noteworthy amendments made to the EMDG.
Anyone considering applying for the grant is encouraged to contact Watermark Advisory Services for further information.
By Ashanie Perera