3rd April, 2020
The Australian Federal Government has made some significant changes to one of its longstanding grant programs in an attempt to help local SMEs and startups increase cash flow.
In an economy where access to cash flow is becoming the deciding factor in the fate of a business, government grant programmes are no longer ‘incentives’, but ‘lifelines’ to their recipients.
Entrepreneurs around Australia are grappling with the economic challenges that the coronavirus pandemic continues to present, triggering a response from the Government that includes significant focus on supporting cash flow for businesses.
As a result, they‘ve made significant changes to the rules surrounding one of its most lucrative grant programmes: the Export Market Development Grant (EMDG).
READ: Top government grants for startups in Australia
Administered by Austrade, the EMDG offers businesses with up to a 50 percent cash reimbursement (capped at $150,000) on a wide range of costs that relate to promoting products and services in overseas markets. Throughout the lifetime of a business, this grant can be claimed eight times.
READ: Are you an exporter? You might be leaving this grant on the table
The changes made to the programme aim to lower the barrier of entry and place more cash into the pockets of eligible applicants.
Austrade announced that in addition to the $61 million injection announced in this year’s budget, it would be pumping an additional $49.8 million into the EMDG fund for this financial year.
Historically, EMDG grants have been paid out in two parts. The first payout is received by the applicant once the grant is approved by Austrade, and is capped at $40,000 (meaning, $80,000 of eligible expenditure).
If a business spent more than $80,000, the balance of their grant entitlement is paid out in the second part, which is released at the end of the financial year. But, this second payment is prorated based on the amount of funds left in the EMDG pool, and normally ends up being far less than the maximum entitlement.
According to Austrade, this additional $49.8 million in funding will bring the programme’s second payout factor up to 100 percent, giving all successful applicants their full grant entitlement.
Austrade also announced that it would be bringing the second payout date forward to 31 March 2021, instead of making applicants wait until the financial year end.
One of the grant requirements for businesses making EMDG claims for the third time and beyond is that they need to prove to Austrade that there is a clear return on investment from their overseas marketing efforts.
The legislation stipulates that if a business cannot prove this return on investment (through the approved metrics), it would need to provide an extensive and elaborate justification as to why this is the case. Failing to do so would make the company ineligible for the grant.
However, Austrade announced that for this financial year, applicants will not be expected to prove their export performance and will be entitled to the full 50 percent reimbursement regardless.
The final change that Austrade made to the programme was the decision to treat the costs associated with the cancellation of overseas marketing activities due to the COVID-19 as eligible expenditure.
Essentially, if a business had already paid for flights, conferences, or any other eligible activities that were meant to take place during this financial year or next, in the event that those activities are cancelled due to the coronavirus, any amount not reimbursed by the supplier will be claimable under the EMDG.
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There have also been some changes made to the Government’s R&D Tax Incentive programme (RDTI), another longstanding scheme, which can offer cash rebates to small businesses who incur expenses on eligible R&D activities.
READ: Thinking of getting your R&D claim in?
While applications for this incentive normally open on 1 July and close on 30 April the following year, AusIndustry has officially extended the deadline by five months, allowing 2019 applications to be made until 30 September 2020.
Being that this incentive offers a 43.5 percent rebate on the salaries of those working on the eligible R&D projects, startup activists have been lobbying for the government to bring forward the 2020 RDTI application opening date, bringing significant stimulus to the Australia startup ecosystem.
To date, there has been no indication as to whether or not the government will do so.
It was announced in December that the Government was ready to pass a bill to reform the RDTI and reduce its overall budget by making changes that amount to $1.8 billion in value. In light of the announcement, a committee was formed to scrutinise the Government’s proposed changes and was tasked to do so before the end of April 2020.
But, as a result of the recent events that have shaken the Australian economy, the committee was given a five-month extension to put together its inquiry into the proposed reform.