With the 2017 grant year now wrapped up for Glasshouse Advisory’s clients, it is a good time to review the 2017 grant year and examine any major trends.
Increasing demand for the export grant program
Austrade have recently released data identifying that the claim numbers for the EMDG program have grown substantially in the last 4 years. Specifically, between the 2013 and 2017 grant years, the number of claims lodged have increased by 39%.
The result? An increasingly lower payout factor for second tranche payments
The increasing demand for this program (which has a finite pool of funds) has led to an increasingly lower second tranche payout factor (this applies to payments in excess of the $40,000 first tranche payment); this trend is very disappointing. In the most recent year (the 2017 grant year) the second tranche payout factor was 29.24% for the 2017 grant year, which is in stark contrast to the 2016 payout factor of 64.5%.
You can read our commentary regarding this payout factor here.
Some applicants wait longer for Austrade’s review of applications
Another consequence of the recent increase in demand for the EMDG program has been an extension of the time between claim lodgement and claim finalisation. Austrade does have an internal deadline of the end of June to review all applications from the prior grant year. However, for the last two years we have seen this deadline slip, with Austrade still reviewing grant applications from the previous financial year in July and August. These delayed audits correlate with the ever increasing number of applications. This disappointing trend has an adverse impact on clients, due to the fact that they received their payment in a much later time frame than expected.
The trend of submission numbers peaking in November continues
Austrade invariably receives the greatest volume of applications in November, when the deadline comes for both the non-quality incentive program EMDG consultants, and self-lodgers. It therefore comes as no surprise that from the end of November onwards, Austrade takes much longer to audit most applications. In November the average review time jumps by an additional 7 weeks.
Austrade has indicated that it receives approximately two thirds of EMDG applications by 30 November, with QIP EMDG Consultants (such as Glasshouse EMDG consultants, Tracey Murray and Claire McDowall) lodging the remaining third throughout the December to February period.
Disallowed claims - QIP consultants continue to have the highest success rates
Austrade has many reasons for disallowing claims in their totality – the applicant could be ineligible altogether, the applicant may not be the principal in the transaction, the product may be ineligible, etc.
In the 2016 grant year (2017 numbers are yet to be released), self-lodgers have the highest number of claims which are disallowed in totality, coming in at 10%, and non-QIP EMDG consultants come in at 8% of claims disallowed in totality. QIP EMDG consultants have a much higher success rate with only 2% of their claims disallowed in totality.
The EMDG program for 2018 (which is currently open for applications), remains largely unchanged from the previous 2017 EMDG program. With a Federal government election due in this current financial year, it is unlikely that the budget for EMDG will be increased in relation to the 2018 grant year. As such, EMDG applicants should expect it to be a “business as usual” grant year for the EMDG program.
It is difficult to predict what the second tranche payment will be for the 2018 year, however given how low the second tranche payout factor was for the 2017 year (29.24%) there is the potential for a drop off in applicants, based on a cost/benefit decision. This could result in the second tranche payment being higher for the 2018 year.
However, there are too many variables to confidently make such a prediction.
While the second tranche payout figures have dropped over the past few years, the program still reimburses a percentage of the costs many companies incur as they seek export opportunities. As such, it is a useful tool and does remain a helpful resource for Australian businesses seeking to expand their products and service offerings overseas.
Contact our EMDG experts, who participate in Austrade's QIP program, to discuss the best strategy regarding how to maximise your EMDG claim with lesser effort and a higher chance of success!