EMDG reform supports access to upfront grant

On 10 September, it was announced that the Export Market Development Grant (EMDG) scheme will be reoriented from its current reimbursement model to an upfront grant agreement payable to eligible recipients over multi-year grants from 1 July 2021.

This comes after the Government commissioned an independent review of the EMDG scheme last October to understand the most effective and efficient way to assist exporters.

The current reimbursement grant scheme often makes exporters wait up to two years for payments. This reform however sees the EMDG scheme transition to an upfront grant agreement with the intent of providing eligible exporters upfront funding certainty as they embark on their export marketing activities.

The new model will come in to effect on 1 July 2021, for the 2022 financial year. Current scheme arrangements will therefore carry on for the 2020 and 2021 grant periods – with no impacts to current applications until 30 June 2021 and transitional arrangements being put in place for 2021-2022 financial year.

The reoriented program will provide eligible SME’s with multi-year grants at three stages:

1. Eligible SMEs who are new to export will be able to access grants totalling up to $80,000 over two years;
2. Eligible exporters who plan to expand their presence in current markets or enter new markets, will gain access to grants totalling up to $240,000 over three years;
3. Exporters who continue to expand into new markets will be able to access further grants totalling up to $450,000 over three years.

To be eligible for the EMDG program, SMEs will need to be export-ready and have a turnover of less than $20 million.

Industry bodies and alliances will continue to have access to financial assistance to enable them to undertake promotional activities on behalf of their members in international markets. Grants will be for up to $150,000 per year.

The main reform changes are:

• Moving from a reimbursement scheme to an eligibility based grants program;
• Eligible SME’s will be able to get upfront funding certainty over multiple years;
• Eligibility threshold of annual turnover lowered from $50 million to $20 million;
• Assistance to industry bodies and alliances will be expanded to include both international promotion on behalf of members, and helping members become export ready.

Federal Budget 2020 Update

Key takeaways from the Export Market Development Grants Legislation Amendment Bill 2020 are:

• Continued support of promotional activities
• Inclusion of training and development of marketing skills as eligible costs
• Product to be of substantially Australian origin (also a requirement under current program)
• Grant payments are made from funds appropriated annually to the EMDG program
• Grantees must spend the grant money on eligible expenses for eligible products. The grantee must also spend, at a minimum, a matching amount of their own money on those eligible expenses.
• Entitlement to be provided over multiple years and will undergo periodic reviews and documentation requests
• A grant or instalment may not be payable if the person fails to comply with a requirement to give information, or where circumstances change significantly.

These rules are still being finalised. These will play the most significant role in outlining the parameters of the reform and how it will apply to applicants. These updated rules are expected to provide further clarity to applicants, including how they can determine the amount of grant to be made and define what ‘ready to export’ and ‘eligible expenses’ are.

Grant eligibility

To be eligible for a grant, a person must be Australian, and – in most cases  – ready to export, or already exporting, products of substantially Australian origin. The person must also meet any other conditions specified in rules made by the Minister.

Grants are paid in accordance with a grant agreement between the CEO of Austrade and a grantee. A grantee must spend the grant money, as well as at least a matching amount of their own money, on eligible expenses in relation to eligible products.

The CEO has powers to require information and documents from grantees and others.

Unless the rules exclude the person from this subsection, the person must either be ready to export eligible products; or both export eligible products and seek to expand the person’s export promotion activity (within existing, or to new, export markets) for eligible products.

For more information, please get in touch with our EMDG specialist team below.