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MAJOR INDUSTRY ASSISTANCE IMMINENT | MMF | R&D TAX INCENTIVE | EMDG OCTOBER 2020 UPDATE

Modernisation Manufacturing Fund

A new round of funding to be announced in October

 

R&D Tax Incentive

Announcement on proposed changes expected 12th October 

 

Export Market Development Grant (EMDG) 

Up-front grants proposed from 1/7/2021 in the latest review

 

 

Manufacturing Modernisation Fund (MMF)

In his pre-budget policy announcement at the National Press Club on Thursday, PM Scott Morrison confirmed that the Manufacturers Modernisation Fund will receive an additional round of funding of $52.8m.

Unlike Round 1, these grants will only be directed at companies within the 6 priority sectors being resources technology and critical minerals processing; food and beverage processing; medical products including pharmaceuticals; clean energy and recycling; defence; and space.

The program will provide grants of up to $1m being 25% of total project costs on purchasing and installing new state of the art plant and equipment with upskilling and employing new staff forming part of the merit criteria, it’s a competitive grant process which is expected to fund up to 150 projects.
As the deadline for lodging applications will be quite short – usually 8 weeks from the date of the announcement, means that serious companies with compelling, ready to go projects will be well advised to commence preparing their project plans and applications NOW to ensure a truly competitive application can be lodged as the program is a merit-based competitive grant program which will be well contested.

The below guidelines and eligibility criteria are taken from Round 1 of the MMF.

Who is this for?

  • Small to medium manufacturing enterprises (SMEs) with up to 199 employees.

Overview           

The Manufacturing Modernisation Fund supports manufacturers by co-funding capital investments and associated reskilling to:

  • modernise their plant and equipment
  • adopt new technologies
  • become more productive
  • upskill staff and create more jobs

The program aims to support SMEs through:

  • investment in efficient and transformative manufacturing processes
  • jobs growth and a more highly skilled workforce in the manufacturing sector

Eligibility

To be eligible you must:

  • be an entity incorporated in Australia
  • be a manufacturing SME, with up to 199 employees (headcount)
  • clearly identify the level of job creation expected

You must also engage in trading activities that either:

  • form a significant proportion of your overall activities
  • are a substantial and not peripheral activity of your corporation

You must be able to provide evidence that:

  • the project is supported by your board
  • you can complete the project
  • you can meet the costs of the project not covered by grant funding

If you require assistance, our team of experienced consultants can assist you to prepare and lodge a well-presented application, having prior success in the first round.

 

R&D Tax Incentive update

The government is also expected to announce whether the changes to reduce benefits under the R&D Tax Incentive program which have been the subject of an ongoing and often delayed Senate Economic Committee review will be announced on the 12th of October.

Given heated debate and extreme opposition to any of the muted changes to reduce benefits under the program by $1.8 billion over 4 years, it would not surprise me to see a complete pivot by the Government given the new Government industry advisor’s Andrew Liveris comments about reinvigorating our manufacturing sector and the need to ramp up and fund additional R&D in a technology-driven world.

As an outcome of COVID 19, the Government now has a mandate to roll-out the greatest economic reform and industry assistance measures seen since the 1980s as “playing politics” on issues like the environment and energy can now be cast aside in this very pivotal moment in history. Given the shock announcement that the EMDG program (see article below) may move to pay up-front grants, it would not surprise me to see refundable tax credits paid quarterly through the BAS system to fund R&D activities up to 18 months earlier than at present. This initiative would fill a market gap and fuel R&D at a time that it is increasingly difficult to raise capital.

 

EMDG: Up-front grants proposed in 2021

The Minister for Trade, Tourism and Investment, Senator the Hon Simon Birmingham, has released a review of the Export Market Development Grants (EMDG) scheme undertaken by Mrs. Anna Fisher to examine the effectiveness and efficiency of the EMDG scheme.

The Review reaffirmed the broad principles behind government assistance for export businesses and acknowledged that EMDG is valued by SMEs and helps offset the high cost of export promotion, accelerates internationalisation, and encourages exporters to diversify. However, the Review found that the administration was too complex and in need of simplification.

The Review proposed, and the Government has accepted the recommendation in principle, that the EMDG program should be re-orientated, retaining features valued by SME exporters, while making it simpler for eligible SME exporters to access.

Under the proposed new EMDG, eligible SMEs will be able to get upfront funding certainty over multiple years for eligible marketing and promotional activities, before undertaking any of their agreed export marketing or promotion activities.

Grants will target eligible export-ready SMEs with an annual turnover of less than $20 million at three stages of their export journey:

  • Eligible SMEs who are new to export – grants up to $80,000 over two years
  • Eligible exporters who plan to expand their presence in export markets – grants up to $240,000 over three years
  • Eligible exporters who continue to expand into new markets – grants up to $450,000 over three years

The new EMDG will not be a clean slate for exporters. EMDG entitlements received in the past will be counted in the grant history, so exporters who have received the maximum eight grants will not be eligible for the proposed new EMDG.
The Government is proposing the commencement of the new EMDG from 1 July 2021, subject to legislation passing through Parliament.
Current EMDG arrangements remain in place for the 2019-20 and 2020-21 financial years. As such, there will need to be transitional arrangements in place for 2021-22 during which applicants may be reimbursed for incurred expenses in 2020-21 under the current EMDG and seeking pre-approval for future expenses in 2021-22.

The Review and the Government’s immediate response address only the high-level considerations of a new EMDG. The details are to be determined during a period of consultation over the coming months. These details include critical issues such as the eligibility criteria for each grant stage, what expenses will be eligible, and whether there will there be an export performance test.

The nominal benefit of the new pre-approval EMDG is to provide certainty of finance to exporters as well as faster access to EMDG funds. The intention is for applicants to submit marketing plans for up to three years to enable them to formalise Funding Agreements with Austrade, identifying which of their proposed export marketing expenses will be supported, with payments to be made by Austrade on a milestone basis. This is not dissimilar to the Accelerated Commercialisation model which involves an extensive pre-approval process.

TCF will continue to monitor and report on the upcoming passage of the new legislation.

 

TCF Services

TCF can assist  with free, no-obligation services such as:

Give us a call.  We may be able to help your business.

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