With the Federal Budget release, the Government has announced plans to offer SMEs an additional $60 million in funding to assist with overseas marketing activities and a bonus $1 million to promote Australian businesses overseas, writes Benjamin Kluwgant.
The lead up to the release of the Federal Budget is always a suspenseful period for the Australian public, with various ‘surprise’ announcements that tend to come from all directions during this period.
Keeping within this suspenseful theme, news emerged late last week that, as part of the Federal Budget 2019, an additional $60 million in funding is going to be injected into the already existing export market development grant (EMDG) fund, with the aim to encourage even more Australian businesses to explore international markets.
The announcement was made by Senator Simon Birmingham, who told Sydney Morning Herald that the $60 million boost would make “a real difference” to Australian businesses who were “exporting for the first time or considering developing new overseas markets”.
This was coupled with the announcement on Budget Night that the Government would also be tipping an additional $1 million into promoting Australian businesses overseas in 2019-20.
But the question is, what do SMEs or startups need to do to access their share of this $60 million in grant funding?
Before answering that question, let’s take a step back and talk about the background and benefit of the EMDG.
One of the benefits of building a business in the Australian market is that our country can be treated as a pilot program. Australians can test their products or services in this smaller and more defined economy before taking their offering global.
To encourage businesses to take the plunge and explore international markets while helping them mitigate the financial risk of doing so, the Australian Trade and Investment Commission (Austrade) established a grant scheme called the EMDG, which promised to provide Australian SMEs (businesses who turn over less than $50 million per annum) with a 50 percent reimbursement on many of the costs associated with exploring international markets.
This grant, which was established in 1997, is capped at $150,000 of funding (as in, 50 percent of $300,000) and can be claimed eight times throughout the lifetime of a business.
This initiative has been particularly lucrative for businesses sending company representatives overseas to explore international markets, as not only does it cover half of the costs associated with airfares, it also provides each team member with a $350 per day allowance to cover costs like accommodation, food and ground transport, making the trip far more affordable.
In addition to overseas marketing visits, the programme also covers 50 percent of the costs associated with export market promotional literature, including digital marketing costs like Facebook ads and Google AdWords.
As you can probably imagine, since its establishment, this grant has been very popular among SMEs, resulting in thousands of them submitting applications year on year to receive this reimbursement.
But in recent years, due to the extremely lucrative nature of the grant and some cuts to its budget, the government started running out of funds and were unable to commit to the full 50 percent reimbursement, and subsequently changed the way they administered the grant.
Assuming the application was approved by Austrade, the government started paying out the full 50 percent of the grant for the first $80,000 spent, and businesses would then need to wait until the EOFY to receive their second payment, which was prorated based on the amount of funds left in the pool.
To the misfortune of many SMEs and startups who started relying on this grant, Austrade’s two tranche payment system resulted in businesses receiving a 35 to 40 percent reimbursement for their expenses above $80,000 – a significant decrease in the overall value of the grant payment.
With the above in mind, the baseline question remains: where does Birmingham’s $60 million EMDG increase fit in?
While we can only speculate at this stage, it appears the $60 million that’s going to be put into the grant scheme will either bring the second payment back to the full 50 percent, or perhaps even offer the entire grant in the one payment – either way, it looks like good news.
So if you’re an exporter or planning an export business, make sure to tune in to the release of the Federal Budget tomorrow evening so the speculations can be laid to rest and you’ll (hopefully, bearing in mind things could change under a new government later this year) be able to start planning the next export trip with expectation of receiving the full 50 percent reimbursement this coming financial year.