More Australian businesses are exporting than ever before and small business exports alone make up nearly 40% of all total exports from Australia.
In fact, many companies are now skipping the phase of testing the Australian market and launching into foreign markets immediately after the development of a product or service. Many of these business owners will know the export industry can be a challenging place to enter and manoeuvre through successfully but there are a number of specific grants available to support Australian SMEs looking to do just that.
Once such grant is called Export Market Development Grant (EMDG). The EMDG scheme is the Australian Government’s principal financial assistance program for aspiring and current exporters. Under the scheme businesses can claim for expenditure on specific export promotion activities undertaken during the grant year.
While the EMDG scheme is currently being claimed by 3195 SMEs Australia wide, there’s still a significant number of exporters who apparently are not aware of the program or believe the administration burden and red tape associated with the program is too excessive to warrant lodging a claim.
But that needn’t be the case. Here’s what you need to know.
Basic requirements to be EMDG ready
Your business may be entitled to a grant of up to 50% of your eligible export promotion expenditure over the $15,000 threshold. A minimum grant of $5000 and a maximum of $150,000 apply in relation to the amount that can be claimed annually under the scheme.
If you are an Australian individual, partnership, company, association, co-operative, statutory corporation or trust carrying on business in Australia you may apply for an EMDG, provided you meet these basic criteria and other conditions:
- Had annual income of not more than $50 million during the grant year; and
- Spent at least $15,000 on eligible export promotion activities during the grant year. Please note that first time applicants may combine two consecutive financial years’ expenses in the first EMDG claim to meet this threshold.
Whilst the legislation for the EMDG scheme is relatively simple, the interpretation of these rules and how Austrade apply them can be problematic. Quite often first time applicants will get a detailed audit of their claim in which Austrade may look to reduce the expenditure items claimed or knock out the entire claim on an eligibility issue.
If you are considering applying for an EMDG, there’s a few things you need to do to get your business in order:
- Are your products, services or IP in a state ready for sale?
- Is your business the principle in the transaction (e.g. the exporter)?
- Have you incurred the relevant expenditure and have you been paid prior to the end of the claim period?
- Have the claimed expenses been incurred for approved promotional purposes?
- Where there are multiple legal entities with a business group, eligibility for the grant can be affected. For example, a business may not be eligible where the overseas related entity invoices customers directly in the foreign country and there is no flow of export income back to the Australian company.
While the deadline for EMDG applications is November 30, if you have been thinking about applying for the grant, it’s not too late to get your ducks in a row if an EMDG consultant applies on your behalf, as they receive a three-month extension to February 2016.
DIY or outsource?
There is no doubt EMDG grants can be highly worthwhile, but the application process can be a challenge due to the level of administration required, and interpretation of the rules. There’s no point doing all the hard work on your own if your application is rejected. Once an application is rejected, you cannot claim EMDG for that financial year, so it’s important to get it right.
For this reason, it’s wise to research your options for hiring an EMDG consultant to apply on your behalf and potentially increase the return. In fact, nearly three quarters of EMDG claims are made by consultants and the average claim value is significantly higher than that of self-prepared claims ($5000 average difference in 2013/14)
Case study: Annex Products
Smart50 finalist Annex Products, founded in Melbourne by Rob Ward and Chris Peters, develops products that enable the integration of technology into an active lifestyle.
Annex’s main consumer product is Quad Lock, an iPhone mounting system that locks onto bikes and cars, and the company also has an arm-band product.
Deciding they wanted to make their Quad Lock range global, over a period of four years, Annex grew from a startup to a company manufacturing in China and Germany, with third party logistics warehouses in Australia, the US and the UK, selling online and shipping to 120 countries globally.
Understandably, the cost to export overseas was a considerable one for Annex. They decided to apply for EMDG to offset some of these expenses, and discovered there was a host of items they could claim. These included:
- Attending trade shows
- Engaging overseas representatives to promote a product/service on the company’s behalf
- Setting up their website overseas, as well as online advertising/marketing services such as Google AdWords and online marketing campaigns
- Applying for global patents
Over recent years, Annex have received valuable funding from EMDG to support promotion of their overseas exports, which played a part in supporting their growth to an $8 million turnover business in four years.
If you’re planning to expand your business internationally or are already doing so, make sure that applying for an EMDG is part of your strategy. In 2015 an independent review of the EMDG scheme found the grants remain integral to the success of Australia’s international businesses because they support jobs, GDP and growth, so it’s likely that EMDG is here to stay for years to come.
Brendan Brown is a partner at MPR Group.