Mitchell and Co Client Newsletter February 2023 – the first one for the year.

Last week two things happened in relation to the EMDG program that I need to talk about.

Those being: –
Announcement of EMDG Round 3 lodgement dates
• Release of the 2022 Operational Review of EMDG – the John Langley report

The announcement of the opening of Round 3 was sent in an email blast to all contacts on the Austrade EMDG database.

If you are already in the EMDG pool via Round’s 1 and 2 – Round 3 is not something you have to worry about.

The Operational Review does however foreshadow planned changes to Round 4 applications, which will happen this time next year in 2024.

These changes will impact all exporters/applicants in the future, in short it will be harder to access the program from 2024, so it does pay to have a good think about your grant status and planned expenditure now, while you are covered by Rounds 1, 2 and 3 in the immediate future.

I will do this first and then comeback to the operational review findings and the proposed changes for Round 4.

Here goes.

Round 1 – 21/22, 22/23 and 23/24 3-year coverage for EMDG.

This the round that commenced from July 2021.

For Tier 2, 3 and 4 (representative bodies) the grant offer period had a 3-year horizon.

It covers your EMDG expenditure (to the capped amount) for the 3 years , 21/22, 22/23 and 23/24.
Round 1 ends on June 30th, 2024.

21/22 grant offers for Tiers 2 and 3 have already been paid upon the submission of your milestone report lodged by us. Payments were very, very slow in the initial stages, but much improved towards the end.

There are some Milestone reports still to be assessed by Austrade. These are for those applicants that were prepaid (Tiers 1 and 4 representative bodies). I expect these to happen soon.

This means you have been paid 1 grant (of the 8 your get in total) and one of the 3 years covered by your grant offer.

The next thing you have to do (we do it for you) is to lodge your Milestone report for this financial year 22/23 from July 1 2023.

Think about your export marketing activities and payments up to June 30th, contact us if you need to discuss things – pay for things now or next year etc.

We’ve made a start on some already, we will make contact in the coming months to get you ready for an early prompt lodgement post July 1. You will get paid soon after Milestone report is lodged.

Round 2 – 22/23 and 23/24 2-year coverage.

For Austrade’s own reasons (do not get me started), the period covered by the Grant offer was reduced from 3 to 2 years as well as the capped grant amount per year.

Round 2 will therefore end on June 30th, 2024 – the same as Round 1.

Round 2 payments for each tier being reduced from Round 1 levels to:-
• Tier 1 – $10,000 – for those new to exporting.
• Tier 2 – $18,000 – for those expanding their export sales.
• Tier 3 – $28,000 – a “strategic shift” required to one’s export efforts.
• Tier 4 – $50,000 – Industry representative bodies.

As with all Rounds/Tiers to get the above sums, you need to spend double to claim 50% back.

EMDG is still reimbursement based. Your grant is capped at the above figures, spend more than double the cap – tough luck, your grant payment remains unchanged.

We lodged your application back in July/August last year. Many of you would be aware that there were problems with the MyGovID log-in process to get your grant offer accepted, I think it would have been easier in some cases to walk over hot coals!

But well done, you got there in the end. As your lodging agent we cannot accept the grant offer on your behalf. You must do it. We can only offer support or encourage from the sidelines as to how fix blockages in the process.

To date over 75% of clients have had their grant offers executed.

The balance still being processed or acceptance is being held up by above mentioned MyGovID issues.

What you need to do next, like Round 1 (Year2) is to lodge your Milestone Report for this financial year 22/23 from July 1 2023.

Please think about your export marketing activities and payments up to June 30th, contact us if you need to discuss things – pay for things now or next year.

This will be your first payment.

You only get 2 years coverage – a change from Round 1.

Your second will be covered by next financial year 23/24. Your grant offer finishing on 30th June 2024, the same as Round 1.

Round 3 – 23/24 1 Year Coverage.

This is one of the big announcements by Austrade last week.

The lodgement period is short.

It is from 15/03/2022 9.00am AEDT to 14/4/2022 4.00PM AEST – some 28 days, but with allowance for the Easter Holidays period. Christmas Grinch coming early!

Key changes from Rounds 1 and 2.

• You are only getting a grant offer period of 1 year. Again, do not get me started, the rationale behind the changes is not based on helping exporters with forward certainty but to help Austrade with its own forward planning.
• Your grant offer will cover the period 01/07/2023 to 30/06/2024. Your grant offer will expire at the same time as Rounds 1 and 2 – see the theme arising here?
• There are changes to the terminology “Strategic Shift” – which in essence will make it harder to access Tier 3 status.
• Austrade now requires businesses to meet their taxation obligations, that is, comply with all the relevant Australian Taxation Office (ATO) legislation, rulings, and guidelines – to ensure grant funds go to export promotion, not to pay tax debts – strange but true.

There are now 3 different sets of guidelines for each of the three rounds – confusing to say the least.

An exporter doing the same thing in terms of export promotion, being assessed differently under different rules and different funding levels.

You cannot use EMDG proceeds to pay your any ATO tax debt. This is nonsense as you still getting paid on reimbursement basis, you spend your money on marketing and get 50% back – you do not get paid first. The process will be manageable just another part of the EMDG simplification process!

We’ll be touch with you in the coming weeks to get the ball rolling on your Round 3 application as to what we need and get the job done.

We do not know what the funding level (Tier caps) will be for round 3 – but it will be closer to Rounds 1 or 2 as opposed to the maximum grants promoted under the scheme ( before the fine print) kicks in.

In summary – Rounds 1, 2 and 3.

All current rounds therefore expire on June 30th, 2024.

So, all applicants to remain in the scheme (up to 8 grants not having been paid) will have to re-apply in Round 4.

The warning bells are already ringing for Round 4, so best to read on for 5 minutes or so.

Round 4 – From July 1, 2024, the future is just around the corner.

In the operational review mentioned above, John Angley reported the following:
“Under EMDG 2.0. the grant amounts did not meet stakeholder expectations.”

Let me explain the “Govt speak” – “did not meet expectations” actually means as follows:
It means (in my view), one of the biggest cock ups in terms of the rules of engagement for EMDG since the history of mankind, well since EMDG commenced back in 1973/74 – close to 50 years ago.

• The scheme design was flawed from the start, with no link to export sales performance.
• The scheme has not delivered promised greater certainty to exporters.
• Funding certainty – over a 3-year period – has been cut back to one year.
• Promised funding levels (expectations) have not been met – as above.
• Exporters doing the same thing are paid different amounts depending on when they apply.
• The scheme funding is based on estimates but is paid on actuals.
• The scheme is not an upfront grant, it is preapproval only, it still reimbursement based like before.

Basically the “Great Expectations” of the changes to the program arising from the 2019 Anna Fisher report have not been met.

Thinking of Charles Dickens as the author of the novel of the same name, a more like for like reading with EMDG would be “Bleak House”.

In Bleak House a family waits in vain for an inheritance to arrive, but it never does – a bit like the promised max grants (s.t. demand – fine print) for the EMDG program – promised, but never delivered.

EMDG under the new rules has simply been oversubscribed, too many applicants have accessed the funding on a cumulative basis.

Two ways to fix this of course.
• Funding Fix – More Money – that’s not going to happen.
• Rules Fix – Change the rules of entry to make it harder to access it.

The operational review makes it clear the latter option is going to happen.

Round 4 will be much harder to apply for.

Some of the proposed changes are mentioned in the Operational Review report.
• Minimum turnover requirement.
• Minimum marketing spend requirement.
• Export Readiness Test? (Isn’t that what the required Plan to Market is?).
• Change the 50% reimbursement rate.
• Priority based on Industry sectors.
• Reduce the number of years from 8.
• Close EMDG on first in grant basis up to a set number of applications.

The changes must go through the parliamentary process for approval. Most are a case of “Back to the Future” where in place under the old EMDG framework.

There will be a consultation process of course but I am not too sure how it will pan out – will exporters be listened to or not?

I think the changes will not be known until December of this year and Round 4 will happen about this time next year.

If you are in EMDG now for Rounds 1 or 2 – you really need to focus on maximising your grant offer/grant applicable EMDG expenditure up to June 30th 2024.

If you are not a Round 1 or Round 2 applicant & are thinking of applying for Round 3 at all – go for it!!

You will at least have your hat in the ring for the 23/24 year. Once the rules of engagement for 2024 are known (early next year) you can then decide to accept your grant offer or not – maybe going for Round 4 or deciding that year may not suit you, so having at least 23/24 to be paid to you.

Happy to chat. Please call away.

A good EMDG story at last.

If you are still reading, well done you deserve a medal. But wait there’s more!

I just got a grant application under the old scheme paid after 11 years and 3 months. I lodged on November 30th, 2012.

We never gave up and got paid in full. There were tears (not Tiers) of joy I can tell you when the payment finally hit the bank account. No Bleak House reading for this one.

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