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 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.
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:
Receiving your payment works as follows:
Interested to know if your business might be entitled to EMDG funding?
Fashion Export Unit Trust sells their trendy garments overseas
|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.
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: