What Are Australia’s Film Tax Offsets?
Australia offers four refundable tax offsets designed to support screen production and digital games development. These offsets – the Producer Offset, the Location Offset, the PDV Offset, and the Digital Games Tax Offset – are among the most generous production incentives in the world, and they form the financial backbone of Australia’s screen industry.
The offsets are established under Division 376 of the Income Tax Assessment Act 1997 and operate through a two-stage process. First, Screen Australia assesses eligibility and issues certificates. Then, the Australian Taxation Office (ATO) processes the actual tax offset claim through the company’s income tax return. The system has been in place since 2007, when it replaced the older 10BA and 10B tax concession schemes that had operated since the 1980s.
The critical word here is refundable. Unlike a standard tax deduction or non-refundable offset, these offsets are paid to the company even if it has no tax liability. A production company that earns no other income and owes zero tax still receives the full offset amount as a cash payment from the ATO. This makes the offsets a genuine financing tool, not just a tax reduction measure.
As Carmel, founder of Count Out Loud and a CA and CPA qualified accountant, explains: “The refundable nature of these offsets is what makes them so powerful for independent producers. You are not waiting to offset against future profits – you receive actual cash back from the government based on your qualifying expenditure. For many Australian productions, the Producer Offset is the single largest source of finance in the budget.”
Across the four offsets, the Australian Government invests hundreds of millions of dollars annually into the screen and games sectors. Understanding which offset applies to your project, what expenditure qualifies, and how to maximise your claim is essential knowledge for any producer or studio operating in Australia.
Comparison Table – All Four Offsets at a Glance
Before diving into the detail of each offset, here is a side-by-side comparison of the four schemes. This table provides a quick reference for producers assessing which offset applies to their project.
| Feature | Producer Offset | Location Offset | PDV Offset | Digital Games Tax Offset |
|---|---|---|---|---|
| Rate | 40% (feature films with theatrical release) / 30% (all other formats) | 30% | 30% | 30% |
| Eligible productions | Feature films, TV series, documentaries, short-form content made by Australian producers | Large-scale film and TV productions (typically international) that shoot in Australia | Post-production, digital and visual effects work done in Australia | Original video games developed in Australia |
| Minimum QAPE threshold | $500K (features); $250K (other formats under 65 mins); varies by format | $20,000,000 | $500,000 | $500,000 |
| Australian company required? | Yes – must be an Australian resident company | No – the applicant company carries out the production in Australia | No – but work must be done in Australia | Yes – must be incorporated in Australia |
| Provisional certificate required? | Yes – from Screen Australia | Yes – from the Arts Minister | Yes – from the Arts Minister | Yes – from the Arts Minister |
| Key eligibility test | Significant Australian Content (SAC) test | Principal photography in Australia; minimum $20M QAPE | Post/digital/VFX work carried out in Australia | Must be an original game (not a port, remaster, or expansion) |
| Typical claimant | Australian independent producers, production companies | International studios, major co-productions | VFX and post-production studios, international productions doing post in Australia | Australian game development studios |
| Can combine with other offsets? | No – cannot combine with Location or PDV Offset | Yes – can combine with PDV Offset (but not Producer Offset) | Yes – can combine with Location Offset (but not Producer Offset) | No – standalone offset |
Each offset serves a distinct purpose and targets different segments of the production landscape. The key decision for most Australian producers is whether to pursue the Producer Offset (which offers a higher rate for feature films but has stricter eligibility requirements) or whether their project might qualify for a combination of the Location and PDV Offsets.
Producer Offset (40% / 30%) – Detailed Guide
What Is the Producer Offset?
The Producer Offset is the primary tax incentive for Australian screen productions. It provides a refundable tax offset of 40% of Qualifying Australian Production Expenditure (QAPE) for feature films that have a theatrical release, and 30% of QAPE for all other eligible formats including television series, documentaries, short films, and online content.
The offset is designed to support Australian storytelling by incentivising production spending within Australia. It is the most widely used of the four offsets and is claimed by hundreds of Australian production companies each year.
To illustrate the financial impact: on a feature film with $2,000,000 in QAPE, the 40% Producer Offset delivers $800,000 back to the production company. On a television series with $5,000,000 in QAPE, the 30% offset returns $1,500,000. These are substantial sums that often represent the difference between a project being financially viable and not proceeding at all.
Eligibility Requirements
To claim the Producer Offset, a production must satisfy several requirements:
1. Company structure: The applicant must be an Australian resident company. Sole traders, partnerships, and trusts cannot apply. If you are a filmmaker operating as a sole trader and plan to claim the Producer Offset, you need to incorporate a company before you begin production. We have written a detailed guide on when and how to incorporate for this purpose.
2. Significant Australian Content (SAC) test: The production must have significant Australian content. Screen Australia assesses this based on several factors including the subject matter of the production, where it was made, the nationalities and residences of the people involved, and whether the production was made under an international co-production arrangement. For official treaty co-productions, the SAC test is taken to be satisfied automatically.
3. Format requirements: The production must be a feature film, television series, telemovie, documentary, short film, or other eligible format as defined in the legislation. Certain formats are excluded, including news and current affairs programs, sports coverage, game shows, panel shows, and infomercials.
4. Minimum QAPE thresholds: The production must meet the minimum QAPE requirements (see table below).
5. Not claiming another offset: The production cannot claim the Location Offset or PDV Offset on the same expenditure.
Rates by Format
The Producer Offset operates at two rates:
- 40% – for feature films that receive a qualifying theatrical release in Australia. The theatrical release must be a genuine cinema release (not a limited screening to qualify technically). Screen Australia assesses this based on the distribution arrangement and release plan.
- 30% – for all other eligible formats including television series, documentaries, telemovies, short films, online series, and feature films that do not receive a theatrical release.
The distinction between the 40% and 30% rate is significant. On a $2M QAPE production, the difference between 40% and 30% is $200,000. This is why many independent feature film producers pursue theatrical distribution agreements even when the commercial returns from a cinema release may be modest – the uplift in the offset rate can far exceed the cinema revenue.
Minimum QAPE Thresholds
Each format has a minimum QAPE threshold that must be met for the production to qualify:
| Format | Minimum QAPE |
|---|---|
| Feature film | $500,000 |
| Single episode or season of a series (65 minutes or more commercial broadcast time) | $500,000 |
| Single episode or season of a series (under 65 minutes commercial broadcast time) | $250,000 |
| Short film or other non-feature non-series format | $250,000 |
| IMAX film | $250,000 |
These are minimum thresholds, not targets. Your QAPE will typically be the total of all qualifying expenditure on the production. The threshold simply determines whether you meet the minimum bar for eligibility.
The Application Process
The Producer Offset claim process follows four stages:
Stage 1 – Provisional certificate: Before or during production, the production company applies to Screen Australia for a provisional certificate. This application includes details about the production, budget, financing plan, key personnel, and how the production satisfies the SAC test. Screen Australia assesses the application and, if satisfied, issues a provisional certificate. This is not a guarantee of the final offset but confirms that the project is on track to qualify.
Stage 2 – Production: The company produces the film, series, or documentary, tracking all expenditure carefully to identify QAPE.
Stage 3 – Final certificate: After the production is completed, the company applies to Screen Australia for a final certificate. This requires an audited statement of QAPE, evidence that all eligibility requirements have been met (including the theatrical release requirement for the 40% rate), and confirmation that the production has been completed.
Stage 4 – ATO claim: Once the final certificate is issued, the company lodges its income tax return with the ATO, including the Producer Offset claim. The ATO processes the claim and pays the offset amount to the company – typically within 4-8 weeks of the tax return being processed.
The entire process from provisional certificate to receiving the offset payment can take 12-24 months depending on the production timeline and processing times.
Common Mistakes That Reduce Your Offset
In our experience at Count Out Loud, where we have helped clients claim over $5 million in Producer Offset payments, these are the most common mistakes that reduce the offset amount or jeopardise the claim entirely:
1. Not incorporating early enough. The production company must be established before significant production expenditure is incurred. We regularly see first-time producers who start spending money as sole traders and only incorporate when told they need a company for the offset. Expenditure incurred before the company exists, or before the provisional certificate date, creates complications and may not qualify as QAPE.
2. Poor QAPE tracking. Producers who do not track QAPE from day one inevitably miss eligible expenditure. On a recent documentary engagement, our team identified $87,000 in undocumented QAPE that the production had not captured in their records – expenditure that would have been lost without a thorough reconciliation. As Carmel puts it: “Every dollar of eligible spend that goes untracked is 40 cents or 30 cents you are leaving on the table.”
3. Misclassifying Australian expenditure as non-QAPE. Some expenditure that producers assume does not qualify actually does. Superannuation contributions, workers compensation premiums, and certain on-costs for Australian crew are all QAPE. Conversely, some expenditure that looks Australian may not qualify – for example, a payment to an Australian agent for international talent may not be QAPE if the services were provided overseas.
4. Inadequate documentation. Screen Australia’s auditors require clear documentation linking every QAPE item to an invoice, receipt, or payroll record. Missing documentation means the expenditure is excluded from the QAPE statement, reducing the offset.
5. Failing to get a theatrical release for features. The difference between 40% and 30% is so substantial that failing to secure a qualifying theatrical release for a feature film represents a significant financial loss. Producers should be negotiating distribution arrangements that include theatrical release early in the process.
6. Applying development costs incorrectly. Development expenditure incurred before the provisional certificate date may not qualify as QAPE. The timing of the provisional certificate application relative to when costs are incurred matters enormously. Carmel advises all production clients: “Apply for your provisional certificate as early as possible. The sooner it is in place, the more of your development spend becomes eligible QAPE.”
Location Offset (30%)
The Location Offset provides a 30% refundable tax offset on QAPE for large-scale film and television productions that carry out principal photography in Australia. It is designed to attract major international productions to Australian locations and studios.
The minimum QAPE threshold for the Location Offset is $20,000,000, making it the highest-threshold offset and effectively limiting it to large-budget productions. This is deliberate – the offset targets the kind of productions that bring hundreds of jobs, inject millions of dollars into local economies, and utilise Australian studio facilities and crews at scale.
Key eligibility requirements include:
- The production must carry out principal photography or other specified production activities in Australia
- QAPE must be at least $20,000,000
- A provisional certificate must be obtained from the Arts Minister (through Screen Australia’s assessment process)
- A final certificate confirming completed production and audited QAPE is required before claiming
The Location Offset can be combined with the PDV Offset on the same production. This means a large international production that shoots in Australia and also does its post-production and VFX work in Australia can claim 30% on its production QAPE and 30% on its post/VFX QAPE – a powerful combined incentive. However, it cannot be combined with the Producer Offset.
Major international productions have been drawn to Australia by the combination of the Location Offset, world-class studio facilities (such as those in the Gold Coast and Sydney), highly skilled Australian crews, and favourable exchange rates. The types of productions that typically claim the Location Offset include big-budget feature films from major international studios, large-scale television series with international distribution, and significant co-productions with Australian creative involvement.
For productions considering Australia as a location, the offset calculation is straightforward: total QAPE multiplied by 30%. On a production with $50,000,000 in QAPE, the Location Offset delivers $15,000,000 back to the production company.
PDV Offset (30%)
The PDV (Post, Digital, and Visual Effects) Offset provides a 30% refundable tax offset on QAPE for post-production, digital, and visual effects work carried out in Australia. With a minimum QAPE threshold of $500,000, it is accessible to a wider range of productions than the Location Offset.
The PDV Offset covers expenditure on:
- Post-production services including editing, sound design, and colour grading
- Digital and visual effects (VFX) work
- Animation
- Music composition and recording (when part of the post-production process)
The key eligibility requirement is that the work must be carried out in Australia. The production itself can be shot anywhere in the world – the offset applies specifically to the Australian post-production and VFX expenditure.
This offset has become increasingly important as Australia establishes itself as a global hub for visual effects and post-production. Australian VFX studios have worked on some of the world’s highest-profile productions, and the 30% PDV Offset is a significant factor in attracting this work.
The PDV Offset can be combined with the Location Offset but cannot be combined with the Producer Offset. This means an international production that shoots in Australia (claiming 30% Location Offset on production QAPE) can also claim 30% on its Australian post-production and VFX QAPE – creating a combined incentive structure that makes Australia highly competitive internationally.
For Australian VFX studios servicing international productions, understanding the PDV Offset is essential. The offset makes Australian post-production services significantly more cost-competitive against other VFX hubs including the United Kingdom, Canada, and New Zealand, all of which offer their own competing incentive schemes.
Digital Games Tax Offset (30%)
The Digital Games Tax Offset (DGTO) is the newest of Australia’s screen incentives, introduced from 1 July 2022. It provides a 30% refundable tax offset on QAPE for eligible digital game development carried out in Australia.
Key eligibility requirements:
- The company must be incorporated in Australia and be an Australian tax resident
- QAPE must be at least $500,000
- The game must be an original game – ports, remasters, remakes, and expansion packs of existing games do not qualify
- The game must not contain gambling elements or be a gambling service
- A provisional certificate must be obtained from the Arts Minister
- The game must be completed and a final certificate obtained before claiming
The DGTO represents a significant opportunity for Australia’s growing games sector. Before its introduction, Australian game developers had no equivalent incentive to the offsets available to film and television producers. The 30% rate and $500,000 threshold make it accessible to mid-sized studios working on original titles.
The types of expenditure that qualify as QAPE under the DGTO include salaries and wages for Australian-based development staff, payments to Australian contractors, costs of Australian-based facilities, and other expenditure on goods and services provided in Australia for the development of the game.
For game studios considering the DGTO, the $500,000 QAPE threshold is the key consideration. Studios developing original titles with total Australian development budgets above approximately $600,000-$700,000 (to allow a margin above the threshold) should be actively planning for a DGTO claim. At 30%, a game with $1,000,000 in QAPE would receive $300,000 back from the ATO.
Carmel notes that early engagement with a specialist accountant is particularly important for game studios: “The games industry is newer to these offset schemes than film and television. We find that game studios often underestimate eligible QAPE because they are not yet familiar with what counts. Getting the tracking right from the start of development makes a material difference to the final claim.”
Understanding QAPE (Qualifying Australian Production Expenditure)
QAPE is the foundation of every offset calculation. The higher your QAPE, the larger your offset payment. Understanding exactly what counts – and what does not – is the single most important factor in maximising your return.
The legislative definition of QAPE is expenditure on goods and services provided in Australia for the making of the production. This sounds straightforward, but the detail matters enormously.
What Counts as QAPE
The following categories of expenditure typically qualify as QAPE, provided the goods or services are provided in Australia:
- Australian crew wages and salaries – base rates, overtime, penalty rates, and allowances for crew members working in Australia
- Superannuation contributions – the 12% SG paid on Australian crew wages is QAPE (and is frequently missed by producers handling their own claims)
- Workers compensation insurance – premiums paid to Australian insurers for Australian workers
- Payroll tax – where applicable, payroll tax on Australian wages is QAPE
- Equipment hire – camera, lighting, grip, sound, and other equipment hired from Australian suppliers
- Studio and facility hire – Australian studios, editing suites, sound stages, and post-production facilities
- Location fees – payments to Australian location owners, councils, and permit authorities
- Australian travel – domestic flights, accommodation, vehicle hire, and per diems for Australian-based production activity
- Catering – on-set catering provided by Australian suppliers
- Post-production services – editing, sound design, colour grading, VFX, and music services performed in Australia
- Production insurance – premiums paid to Australian insurers
- Consumables and materials – set construction materials, props, wardrobe, and other physical supplies sourced in Australia
What Does NOT Count as QAPE
The following are common categories of expenditure that producers frequently assume are QAPE but are not:
- Financing costs – interest on production loans, gap finance fees, completion bond premiums, and other costs of raising finance are excluded from QAPE
- Marketing and distribution costs – festival entry fees, publicity costs, poster design, trailer production, and distribution expenses are not production expenditure
- Non-Australian expenditure – any goods or services provided outside Australia, even if paid in Australian dollars to an Australian company, do not qualify. If an Australian VFX company subcontracts work to an overseas studio, the subcontracted portion is not QAPE
- Development costs incurred before the provisional certificate – this is a timing trap that catches many first-time claimants. Expenditure incurred before the provisional certificate is issued may not qualify, which is why applying for the provisional certificate as early as possible is essential
- Payments to non-residents for services provided outside Australia – even if the person is physically present in Australia for part of the engagement, expenditure attributable to work done offshore is excluded
- Copyright acquisition costs – payments for underlying rights, scripts, or other intellectual property are generally not QAPE
- Deferments and in-kind contributions – expenditure must be actually incurred (money must change hands) to qualify as QAPE. Deferred fees and donated services do not count
How to Track QAPE Effectively
Carmel’s approach to QAPE tracking, developed over years of managing offset claims for productions of all sizes, centres on building QAPE classification into the accounting system from day one.
“The worst thing a producer can do is leave QAPE tracking to the end of the production,” Carmel explains. “By that point, you are retrospectively trying to classify thousands of transactions, and you will inevitably miss things or get things wrong. We set up every production’s Xero chart of accounts with QAPE tracking built in from the start. Every transaction is classified as QAPE or non-QAPE as it enters the system, and we can run a real-time QAPE report at any point during the production.”
This approach has three advantages:
- Nothing gets missed – every transaction is classified as it occurs, not months later when memories have faded and context has been lost
- Real-time offset projections – the producer can see their projected offset value at any point, which helps with cash flow planning and financing decisions
- Faster audit – when Screen Australia’s auditors review the QAPE statement, a well-organised system with contemporaneous classifications is far easier to audit, reducing delays and queries
For productions using Count Out Loud’s production accounting service, QAPE tracking is included as a standard part of our engagement. For producers managing their own books, we strongly recommend engaging a specialist film production accountant at least for the QAPE setup and final reconciliation stages.
How to Maximise Your Offset Claim
The difference between a well-managed offset claim and a poorly managed one can be tens or even hundreds of thousands of dollars. Here are the key strategies Carmel and the Count Out Loud team recommend to maximise your return.
1. Engage a specialist accountant at the development stage. Not during production. Not at wrap. At development. The decisions you make early – company structure, provisional certificate timing, budget structure, and expenditure planning – have the biggest impact on your final offset amount. A specialist film production accountant understands these decisions and their consequences.
2. Set up QAPE tracking from day one. As outlined above, retrospective QAPE classification always results in lower claims. Build it into your accounting system from the start.
3. Use a Special Purpose Vehicle (SPV) for each production. An SPV is a separate company set up specifically for a single production. Using an SPV simplifies the offset claim by ensuring all production expenditure is contained within one entity, makes auditing straightforward, and avoids complications that arise when a company is running multiple productions through a single entity.
4. Document everything. Every receipt, every invoice, every contract, every crew deal memo. Screen Australia’s auditors will request supporting documentation for QAPE items. Missing documentation means excluded QAPE, which means a reduced offset. Set up a system – whether digital (we recommend Dext for receipt capture) or physical – and use it consistently throughout the production.
5. Keep Australian expenditure in Australia. This sounds obvious, but production decisions often inadvertently move spending offshore. If you have a choice between an Australian VFX studio and an overseas one at a similar price, the Australian studio’s fees are QAPE and the overseas studio’s are not. That 40% or 30% offset on the Australian spend can make the Australian option significantly cheaper overall.
6. Maximise on-costs. Ensure you are correctly capturing superannuation, workers compensation, and payroll tax as QAPE. These on-costs are often 15-20% of crew wages and are frequently underreported in offset claims.
7. Apply for the provisional certificate early. Every day of eligible expenditure that occurs after the provisional certificate is in place is QAPE. Every day before it is potentially excluded. Apply as early as the legislation permits.
Carmel is direct about the financial impact of poor offset management: “The average first-time feature leaves 15-20% of eligible offset on the table. On a $2M QAPE production at the 40% rate, that is $120,000-$160,000 in lost offset. The cost of engaging a specialist accountant to manage the claim properly is a fraction of that amount.”
Frequently Asked Questions
Can I claim multiple offsets on the same production?
It depends on which offsets. The Location Offset and PDV Offset can be combined on the same production – for example, a production that shoots in Australia (30% Location Offset on production QAPE) and does post-production in Australia (30% PDV Offset on post QAPE). However, the Producer Offset cannot be combined with either the Location or PDV Offset. The Digital Games Tax Offset is a standalone offset for games only. In practice, most Australian independent productions claim the Producer Offset, while large international productions claim the Location Offset (sometimes combined with the PDV Offset).
What happens if my QAPE is below the minimum threshold?
If your QAPE falls below the minimum threshold for the relevant offset, you cannot claim the offset at all. There is no pro-rata payment. For the Producer Offset, this means feature films need at least $500,000 in QAPE and other formats need at least $250,000. For productions that are close to the threshold, it is critical to ensure every eligible dollar is captured – a few missed items could mean the difference between qualifying and missing out entirely.
How long does the offset payment take?
The timeline varies but typically follows this pattern: apply to Screen Australia for the final certificate (allow 4-8 weeks for processing), then lodge the company tax return with the ATO including the offset claim (allow 4-8 weeks for ATO processing). In total, expect 2-4 months from final certificate application to receiving the offset payment. Delays can occur if Screen Australia requests additional information or if there are issues with the QAPE audit.
Do I need a company to claim the Producer Offset?
Yes. The legislation requires the applicant to be an Australian resident company. Sole traders, partnerships, and individuals cannot apply. If you are a sole trader filmmaker planning your first production, you need to set up a company before you can apply for a provisional certificate. We recommend doing this well before production begins – ideally during the development stage.
Can a sole trader claim any of the film tax offsets?
No. All four offsets – Producer, Location, PDV, and Digital Games – require the claimant to be a company. Sole traders and individuals are not eligible. This is one of the key reasons we advise filmmakers to incorporate early in their careers if they intend to produce content.
What is the difference between the Producer Offset and the old 10BA?
The Producer Offset replaced the older 10BA and 10B tax concession schemes in 2007. The old system provided tax deductions to investors in Australian films, which incentivised investment but created structures that were sometimes more about tax minimisation than filmmaking. The Producer Offset is a refundable tax offset paid directly to the production company, which is simpler, more transparent, and directly rewards Australian production expenditure rather than investment. The offset is also more generous for qualifying productions – 40% of QAPE for feature films compared to the effective benefit under the old system.
Can documentaries claim the Producer Offset?
Yes. Documentaries are eligible for the Producer Offset at the 30% rate (or 40% if the documentary has a qualifying theatrical release, which is uncommon but not impossible). The documentary must meet the SAC test and the minimum QAPE threshold. Documentaries are one of the most common formats claiming the Producer Offset, and Count Out Loud has extensive experience with documentary offset claims.
What if Screen Australia rejects my provisional certificate application?
If Screen Australia declines a provisional certificate application, you cannot claim the offset. However, rejection is not necessarily the end of the road. You can address the issues raised by Screen Australia and reapply. Common reasons for rejection include insufficient evidence of the SAC test being met, incomplete applications, or productions in formats that are not eligible. Before applying, consider engaging a specialist who understands Screen Australia’s requirements and can review your application.
Is the offset taxable income?
The tax offset itself is not assessable income for the company receiving it. However, the treatment can be complex depending on the company’s overall tax position, and it interacts with other provisions of the tax law. Your accountant should advise on the specific treatment in your circumstances. At Count Out Loud, we handle the full tax return preparation including the offset claim, ensuring the treatment is correct.
Where do I apply?
The application process has two stages. First, you apply to Screen Australia for a provisional certificate (and later a final certificate). Screen Australia assesses eligibility and QAPE. Second, you claim the offset through your company’s income tax return, lodged with the Australian Taxation Office. The ATO processes the refundable offset payment.
Need Help With Your Offset Claim?
The Australian film tax offset system delivers genuine financial value to producers and production companies, but only when claims are managed properly. The difference between a well-prepared claim and a poorly prepared one can be hundreds of thousands of dollars.
Carmel and the Count Out Loud team have helped Australian producers claim over $5 million in offset payments. We specialise in Producer Offset services including provisional and final certificate applications, QAPE tracking and reconciliation, auditor liaison, and ATO claim preparation. Our clients range from first-time feature filmmakers through to established production companies managing multi-million dollar budgets.
Whether you are in early development and need advice on structuring your production for maximum offset, mid-production and need to get your QAPE tracking on track, or post-production and preparing your final certificate application, we can help.
Contact Count Out Loud to discuss your offset claim.
- Phone: (02) 9043 1525
- Office: 1 James Place, North Sydney, NSW 2060
- Services: Producer Offset Services | All Services | Book a Consultation
Getting expert advice early is the single most effective way to maximise your offset. Talk to us today.