The Export Market Development Grant (EMDG) program is the Federal Government’s cornerstone funding program for encouraging Australian businesses to seek export opportunities for their goods and services.
While the program has been in existence for 40 years, its popularity amongst Australian exporters continues to rise, with 27% of the more than 3,321 businesses accessing the 2015 EMDG program being first year applicants.
Audits for the 2015 EMDG program have now been finalised, with applicants notified of their second tranche payments on Friday 24 June 2016.
The EMDG program is paid out on a ‘two tranche’ payment basis. For the 2015 year, first tranche payments were set at $40,000, with payments in excess of this amount confirmed once the value of all claims was determined. Given that the EMDG program has a finite pool of funding, if the program is oversubscribed, claimants may not receive their full grant payment, above the first tranche of $40,000. This was the case in the 2015 grant year.
In previous grant years, claimants have received their full grant payout. However in recent years, (i.e. since the 2014 year), the program’s popularity has increased and the program has been oversubscribed, compared to the funding available. As with the 2014 grant year, the 2015 EMDG program was oversubscribed, and second tranche payments were limited to a payout factor of 72.66%.
With the final payout factor for the 2015 grant year 7% higher than the 2014 grant year’s payout factor of 65.28%, it would be easy to conclude that the increased payout for the 2015 year was due to:
- smaller claims by some applicants, leaving more money in the ‘pool’ for larger claimants; or
- given there were more applicants in the 2015 year compared to the 2014 year, more money in the pool, compared to the 2014 year.
However, an analysis of currently available information indicates the higher payout figure is more likely to be influenced by:
- The first tranche payment in the 2014 year was $60,000, compared to $40,000 in the 2015 year. This means that as the first tranche payment (a guaranteed level of payment) was higher in the 2014 year, less money was left in the “pool” for second tranche payments. This lead to a lower final payout for the 2014 year claims (i.e. 65.28%) compared to the 72.66% final payout in the 2015 year.
- Anecdotal evidence from EMDG consultants indicates that Austrade has adopted an increased focus on audit activity as part of the 2015 grant process, with a number of claimants concerned as to the “subjective” nature of some of Austrade’s amendments. It will be interesting to examine the Austrade “disallowance” statistics for the 2015 year (compared to prior years), as there is anecdotal evidence that the higher 2015 second tranche payment may be related to a higher proportion of claims being disallowed by Austrade, compared to previous years. In short, the more Austrade disallows, the greater the residual pool of funds for a second tranche payout.
A small number of EMDG applicants for the 2015 grant year have yet to be audited and therefore have not received any funds. Austrade has indicated these claims were lodged just before the February deadline, and Austrade resources were unable to audit the applications prior to 20 June 2016, being the cut off for all audits to be finalised in order for the second tranche payments to be calculated and paid. The result is that any applicants who have not yet had their 2015 audit commenced by Austrade can expect their EMDG audit to take place in early July.
Given the increasing popularity of the program, Griffith Hack will continue to lobby the Government to consider a funding increase to the EMDG program, to ensure that the program continues to fully support the export efforts of Australia’s small to medium sized businesses. If you would like to be part of this process, or wish to discuss any aspect of the EMDG program and the 2015 grant year process, please feel free to contact one of Griffith Hack’s Austrade accredited EMDG consultant team members below.
Finally, with the 2016 grant program opening to applications on 1 July 2016, we would encourage applicants to start their claim process as soon as possible. Austrade has indicated that applications lodged in the first few months of the program will receive their funding within 4-6 weeks of lodgement (compared to 4-6 months if lodged in November). While the program is open between July and November for self-lodgers and non-accredited consultants, most applicants lodge in the final month of the lodgement deadline. This concentration of applications results in significant time pressure on Austrade resources to finalise its audit program, which can lead to outcomes that the applicant is not happy with.
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As a final comment, Austrade statistics indicate self-lodgers have a lower average EMDG claim, compared to claims prepared by an Austrade accredited consultant. We would therefore urge self-lodgers to consider having their claim reviewed by an Austrade accredited consultant, in order to minimise the potential for expenses to be disallowed by Austrade.