Insights
Producer Offset: Critical Rules for Contracting and Related Party Transactions
The Producer Offset is a lifeline for Australian screen producers, offering up to 40% in tax rebates for feature films and 20% for other eligible formats. However, recent legislative changes and increasing scrutiny from Screen Australia and the Australian Taxation Office (ATO) have made it vital for producers to fully understand the contracting and related party rules that underpin eligibility.
Getting it wrong could mean losing hundreds of thousands of dollars in rebates. Here’s what you need to know.
What Producers Need to Know
Legislative reforms, introduced from 1 July 2024, significantly changed the Producer Offset framework,
- The 20% cap on above-the-line costs has been removed, giving producers more freedom to engage high-calibre Australian talent.
- The Location Offset will increase to 30%, aligning the incentives more closely.
- Minimum duration rules for most non-feature formats have been scrapped, reflecting the rise of streaming platforms.
While these changes open new doors, they don’t lessen the need for airtight compliance, especially regarding contracting and related party transactions.
Producer Offset Eligibility Checklist
Before considering contractual arrangements, ensure you meet these core eligibility criteria (Screen Australia Producer Offset Guidelines):
- Be an Australian resident company or a foreign company with a permanent establishment and an ABN
- Hold a final certificate from Screen Australia
- Not have received funding from the Producer Equity Program
- Have carried out, or arranged for, all activities necessary for making the film
Notably, partnerships, sole traders, and trustees acting for trusts are ineligible.
Why Producers Commonly Use SPVs
Most productions use a Special Purpose Vehicle (SPV) to isolate risk and manage project-specific finances.
While not mandatory, SPVs are common and often required by financiers. However, the SPV must be the entity that incurs the Qualifying Australian Production Expenditure (QAPE) (Income Tax Assessment Act 1997 – Division 376).
Be careful: If the SPV is created after provisional certification, ensure contracts are novated correctly to avoid disqualifying expenditure.
Contracting for Compliance: What Screen Australia Expects
To satisfy Division 376-65, the production company must have “carried out, or made the arrangements for carrying out” the entire production.
This requires contracts that:
- Clearly state the applicant company as the party commissioning the work
- Confirm the responsibility for engaging cast, crew, and suppliers lies with the applicant
- Reflect market-standard terms and properly identify QAPE-related costs
In co-productions, ensure the Co-Producers Agreement explicitly outlines which party is responsible for which activities.
Related Party Transactions: The Silent Risk in Offset Claims
This is where many claims get reduced — or rejected.
Related party transactions happen when the production company contracts with entities under common ownership or control (e.g., a producer’s personal services company or a post-production house owned by the director).
Such transactions are not banned — but must be at arm’s length (ATO Transfer Pricing Guidelines).
Why it matters:
- Screen Australia and the ATO closely review related party transactions to detect inflated costs.
- If a transaction isn’t commercially reasonable, the expenditure may not count as QAPE.
- This can significantly reduce your Producer Offset entitlement.
Checklist for Related Party Compliance
- Independent Pricing – Benchmark against market rates and retain third-party quotes or comparable deals.
- Robust Documentation – Contracts must clearly document scope, deliverables, and pricing.
- Consistent Finance Plan – Ensure budgets, finance plans, and actual transactions align.
- Audit-Ready Evidence – Maintain invoices, time-sheets, contracts, and proof of deliverables.
QAPE Thresholds: Don’t Get Caught Short
Each format has a minimum QAPE threshold. For example:
- Feature Films: $500,000
- TV Series: $500,000 per hour
(Producer Offset QAPE Thresholds — Screen Australia)
Official co-productions can count some offshore expenditure towards eligibility but not towards the rebate itself.
Contracts should be clear on what counts as QAPE and what doesn’t.
Why Producers Choose Modoras Screen Audit Services
We specialise in helping producers structure projects to maximise their Producer Offset while meeting every requirement.
Our Services:
✔ Pre-production Planning – Advice on SPV structure, contracts, and opinions for investors.
✔ Related Party Transaction Audit – Full assessment to ensure transactions are arm’s length and audit-proof.
✔ Compliance Health Check – Review of all documentation before your final certificate submission.
✔ QAPE Maximisation – Identify all eligible expenditure opportunities, reducing offset leakage.
Conclusion: The Offset is Valuable — Don’t Leave Money on the Table
The Producer Offset is critical to many Australian productions — but poor contracting and related party missteps can derail claims.
With legislation now modernised, now is the time to ensure you’re getting it right from day one.
Engage with Modoras Screen Audit Services early to safeguard your claim and maximise your return.
