EMDG Benefits Explained

Lior EMDG Blog

 

The Export Market Development Grant (known as EMDG) is Australia’s #1 incentive for Australian businesses selling their goods or services overseas. It spans almost all industries, such as fashion, cosmetics, software and food and beverages to a name few.

 

I have the pleasure of speaking to many businesses exporting their wares, and the questions that regularly arise are: how does the EMDG benefit actually work? Is it a tax incentive or saving? Is it repayable to the government? Is there tax on the benefit itself?

 

EMDG FROM A FINANCIAL POINT OF VIEW

 

EMDG is categorized as a grant, rather than a tax incentive. The scheme has its own governing body, AusTrade, and is not governed through the Australian Tax Office (ATO).

 

The benefit received does not need to be repaid and manifests in the form of cash. The monies received are to be included in the business’ assessable income.

 

However, as the funds are government grant funds, they do not attract GST.

 

MAXIMUM ENTITLEMENT FOR ELIGIBLE COMPANIES

 

The EMDG affords a rebate of up to 50% on eligible foreign marketing or business development expenditure. Only once a financial year is complete can applicants then lodge their submission; a financial year that is being claimed is termed a “Grant Year”.

 

The calculation works as follows: 

          • The first $5,000 of any claim is exempted by AusTrade.
            .
          • Thereafter, the submitted expenses are assessed for eligibility.
            .
          • Eligible expenses are claimed at a rate of 50%, resulting in total eligible funding.
            .
          • The maximum grant receivable for any single application is $150,000.
            .
          • Businesses are entitled to 8 successful applications, totaling a maximum of $1,200,000 in potential EMDG funding.

 

Receiving your payment works as follows:

          • The grant is paid in 2 tranches.
            .
          • Tranche 1: full payout up to the first $100,000 of eligible funding, immediately after successful audit/review.
            .
          • Tranche 2: payout of the remaining eligible funding (up to $50,000) on or around the 30th of June.
            .
          • It is important to note that should there be insufficient funds available to payout 100% of all Tranche 2 expected payments, AusTrade will distribute remaining funds at a rate of <100%.
            .
          • The rate will be calculated according to the total amount of unpaid approved eligible funding to business' in relation to the total amount of funds remaining in the pool, and paid proportionately.
            .
            .

Interested to know if your business might be entitled to EMDG funding?

Check Eligibility

 

AN EXAMPLE OF THE EMDG CALCULATION

 

Fashion Export Unit Trust sells their trendy garments overseas

 

Eligible Expenditure:    
Google Adwords   $230,000
Instagram   $51,000
Facebook   $74,000
Bloggers   $20,000
Influencers   $10,000
Photoshoots   $25,000
Total Eligible Spend:   $410,000
     
Exempt per AusTrade Formula   ($5,000)
Expenditure post exemption   $405,000
Expenditure at EMDG rate 50% $202,500
     
EMDG Max Grant   $150,000
Total eligible EMDG Grant   $150,000
     
Tranche 1 payout   $100,000
Tranche 2 payout* 100% $50,000
Total EMDG Payout   $150,000

*The percentage payout of Tranche 2 is determined once all Tranche 1 payments have been made.

Our example assumes a Tranche 2 payment of 100%, but this may not necessarily be the case.

 

In our case above, Fashion Exporter Unit Trust will receive $150,000 back in cash through the Export Market Development Grant.

 

Lior Stein is the Co-MD at Rimon Advisory, a leading Australian R&D Tax Incentive and Export Market Development Grant consulting firm.

 

He is a Chartered Accounting by profession but an Entrepreneur by passion.

Lior is a member of the Australian Institute of Chartered Accountants (ICAA) and The Tax Institute.

 

You may be interested to know if your business could use the Export Market Development Grant.

We have put together a few quick questions for you to be able to assess your eligibility.

Click below if you want to know more:

Check Eligibility