Administered by Austrade, the Export Market Development Grants (EMDG) scheme is the Australian Government’s key financial assistance program for exporters, both current and aspiring.
While the 35-year old program has helped thousands of Australian businesses increase their overseas exports with the promotional activity funding — 4,000+ businesses were supported across the 2019-20 financial year alone — it’s long been defined by red tape and complexity. Not to mention serious barriers to entry that have seen many up-and-coming Australian businesses with international export aspirations look elsewhere for the funding and support they need to bolster their overseas expansion efforts through advertising, marketing, intellectual property (IP) and other promotional activities.
“Australia is a trading nation, and the export of our high-quality goods and services supports jobs and businesses in our country,” said Minister for Trade, Tourism and Investment Dan Tehan. “Cutting red tape around the EMDG program will help more businesses take advantage of our Government’s support.”
In September 2020 Austrade announced that it would overhaul and reinvent the scheme, simplifying and adapting it to the needs of Australian businesses, which no doubt came as a relief, especially to service-orientated businesses dependent on the movement of people that have been majorly impacted by COVID-19. The overhaul, with its simplified rules and application and funding process, is set to take effect from 1 July 2021 — but what do those changes really mean for Australian exporters seeking funding for their export promotional activities?
Amended EMDG Legislation is simplified
At the core of the challenges in applying for the EMDG is that the legislation which governs the act (the Export Market Development Grants Act 1997) was excessively complex and made adhering to compliance levels difficult. The degree of uncertainty that this resulted in put many businesses (especially smaller businesses) off applying, as it was often unclear whether they would be compliant with the stipulations of the act. As part of the overhaul, the Government is amending the act, simplifying and streamlining its wording to boost compliance confidence.
Advance grant payments for businesses
While traditionally the grant has been paid out in arrears, that’s all set to change and grants will now be paid in advance, providing better assistance to businesses that were previously unable to cover their expenses before applying for the grant. This is expected to significantly increase the number of businesses applying for the scheme by removing one of the most critical barriers to entry experienced by capital-scarce businesses.
Turnover threshold tightened to help small business
To maximise opportunities for Australian businesses in need, the EMDG turnover threshold is to be tightened, dropping to $20 million from the current threshold of $50 million. This will prevent larger businesses from accessing the program, as much of the overhaul is about targeting businesses in need and the review found that smaller businesses stood to benefit more from Government support. Additionally, this change will ultimately increase the total number of businesses that are able to access the EMDG.
Two new applicant categories for new and growing export businesses
The new EMDG will place applicants into two categories, with different rules and grants for each. The first category, ‘New to Export’, is for established businesses that are ready to begin exporting products and services. Upon passing an ‘export readiness’ test, they can access a grant of up to $80,000 to cover 50% of their eligible export expenses over two years. The second category, ‘Expanding Exporters’, is for businesses that meet the criteria of having established revenue in at least one export market and are looking for further overseas export opportunities. If the criteria is met, businesses will be able to access total grant funds of up to $770,000 over an eight-year period.
Two-tranche payout system scrapped for better funding clarity
Businesses that didn’t apply for the EMDG due to compliance and rebate concerns will undoubtedly welcome the scrapping of the two-tranche payout process. The new rules give businesses greater certainty and clarity over how much they’ll be entitled to, a significant improvement on the previous cap and prorated system that delivered payout flexibility for Austrade, but left grant recipients in the dark as to how much funding they would receive.
Additionally, the removal of annual applications and move to two to three-year grants gives businesses more time to promote their products and services in international markets by minimising time spent on grant applications. The simplified online application portal and the easier application process with less documentation requirements will further bolster the number of Australian businesses applying for the EMDG.
As with any overhaul to a major Government funding scheme, there will always be winners and losers. While many businesses will miss out on eligibility under the new $20+ million turnover threshold, the revamped EMDG will be seen as a big win for smaller Australian businesses with overseas export aspirations.
Thinking of applying for the EMDG from 1 July 2021?
With the EMDG becoming an eligibility-based grants scheme from the commencement of the 2021/2022 financial year, the application process has been simplified and streamlined, and will be as follows:
- Apply for the EMDG before spending claimable expenditure on promotional activities
- Receive a grant agreement from Austrade and enter into an agreement
- Undertake promotional activities as agreed in the grant agreement
- Request milestone payments in line with your grant agreement.
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