Mitchell & Co – May Newsletter

Newsletter for May.

Time for another rambling about EMDG to help you brighten your day (or not).

We have 3 simple messages to get across our client base, some are impacted by all, others just one or two, again depending upon your age/tier structure, your all-important EMDG status – you might not worry about it, but we do.

In summary.

• Rounds 1 & 2 EMDG coverage ends June 30th, 2024 – you need pay your EMDG costs before then.

• Rounds 1, 2 & 3 Milestone reports – now being lodged and paid.

• Round 4 New Rules have been tabled in parliament – yet to be law but it is a happening thing.
In more detail for each:-

Rounds 1 & 2 EMDG coverage.

There is no EMDG coverage for 2024/2025, apart for a percentage of Round 3 applicants.

This is simply a reflection of a funding shortfall to the EMDG program and flaws in the overall fabric of EMDG (called EMDG 2.0), that have risen since they were introduced back in 2019.

We’re calling it a “skipped year,” others soften things by saying that “EMDG is paused at this time.”

To me it’s a new case of the left hand in government not knowing what the right is doing.

What is the point of working so hard (three cheers to Ministers Wong and Farrell) to get the tariffs lifted for wine into China, when EMDG support will be missing for 12 months to help new and existing wine exporters to enter / re-enter that market, it will be hard enough to recover those lost markets without new / extra marketing spend.

Isn’t that what EMDG is supposed to encourage???

You must therefore make sure you spend money on overseas marketing costs before June 30th. You cannot pre-pay any such costs for FY 24/25.

If you have been prepaid your grant, you must spent double that sum, any underspend, you will have to repay any overpayment amount.

You cannot carry forward the overpayment to any new grant agreement you may receive in the future.

To remain in the EMDG program from July 2025, you will have to apply for Round 4 later this year or early next year, see comments that follow in relation to that new merry-go-round.

Rounds 1, 2 and 3 Milestone Reports.

We have already lodged 2024 Milestone reports for Rounds 1, 2 and 3 applicants.

Payments are now flowing. We are processing as fast as we can.

It is a simple message here, if you have already spent double your 2023/2024 grant offer amount , please send your gear to us, and we’ll turn it around as soon we can.

Round 4 New Rules.

Round 4 rules have now been tabled in parliament.

They rules must “sit” (be tabled) for 15 days before both houses of Parliament before they become law.

This will happen sometime in July / August.

New guidelines to support the new rules will be issued later in the year with Austrade stating that the round will open late this year or early next year.

As stated earlier proposed changes to EMDG for Round 4 will mean that many exporters will not be able to count on EMDG support as in the past.

The changes for Round 4 are not about increasing the users in the scheme.

The new changes are about helping fewer exporters.

They are about changes in who can apply (eligibility rule changes) and how to apply (application process changes) to reduce demand on the scheme given that funding will now fall to $110M from July 1, 2025, the lowest on record since 1996.

A simple fix would be to increase funding – the supply of money to match the demand, but instead there are changes to dampen the demand on the program instead, strange but true.

I cannot help myself but to say the new changes are wrong on so many levels.

Eligibility changes.

The new rules stating:

• You must be trading for 2 years for applyIng for EMDG

• You now must submit a “high quality” export plan.

• You must be able show the capacity to spend at least $20,000 on overseas marketing.You must (if applying for the first time) have undertaken an approved export training course or pass a new “Export Readiness Test.”

• You must now have minimum turnover greater than $100,000 with the maximum turnover unchanged at $20M.

• You will get EMDG coverage for 2 years only – that is 2025/2026 and 2026/2027.

• If you execute a grant agreement and submit a Nil $ expenditure milestone report, that will still count as one of your grants notwithstanding no money is paid.

• For representative bodies you will only be supported for “new” activities.

• The three (3) tiers 1, 2 and 3 remain, but you will only be able access each tier twice.

• You must now pass all assessment rules for Goods not made in Australia (not just a majority).

The CEO of Austrade has been given a lot more power and discretion to administer the scheme as he or she see fit. This could be a good or a bad thing, only time will tell.

Application Changes.

This is going to be brutal with many exporters, in my view, missing out.

The scheme will shift from an open access one (all eligible exporters are paid), to a “first come first serve” approach.

“Amendments will facilitate the allocation of grants until funding is exhausted”

Applications will be paid up to the available funds. Then the tap is turned off.

Once the money runs out (and it will as the funding has been cut), applications will not be paid.

Your payment or non-payment will not be merit based, it will be queue based.

It’s the Taylor Swift ticketing approach, lots of people on the computer hoping and wishing for a ticket with many missing out.

I think this new approach hits the jackpot as being all encompassing – inefficient, ineffective and inequitable.

It is just bad government policy.

Why have an application process that’s so flawed in the first place?

It is just dumb.

The Minister can do better.

It can be fixed with more funding, to ensure the demand on the scheme better matches the supply of funds.

Or to prevent the ticket rush – make tougher eligibility rules in the first place so clients know if they should apply or not without wasting their time.

In the coming months we will contact you to get ready for the Round 4 as best we both can.

We will first discuss if you should apply or not, then work with how to make it happen with the greatest chance of success.

As always “keep exporting!” Chin up!.

Stuart & team

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