Telling It Straight to On-screen Grants
With increased overseas interest in NZ as a filming destination, our screen production industry’s future is looking brighter, helped by the New Zealand Screen Production Grant that came into play in April. New Zealand Film Commission’s screen incentives manager Naomi Wallwork dissects some realities around the grant.
In December 2013, the Government announced changes to grants supporting overseas and local film and television productions to ensure further development of NZ’s screen industry. The changes aim to encourage the growth of mid-sized NZ-based productions that can compete successfully on the world stage, while also increasing the competitiveness of our incentives for international productions in the short to medium term.
The Large Budget Screen Production Grant (LBSPG) and Screen Production Incentive Fund (SPIF) were combined to form a single scheme called the New Zealand Screen Production Grant (NZSPG), which came into effect 1 April 2014. Since the changes were made, interest in NZ as a destination for international productions and co-productions has increased, and we are expecting next year to be a busy one as a result.
Like any new or amended Government initiative, understanding of the structure, guidelines, and rules by the public and industry may take a little time to settle in.
Myth 1: NZ’s tax credit is 25% of a film’s total budget
There are three myths in this one sentence alone. Firstly, the NZSPG is not related to the NZ tax system. The NZSPG is a cash rebate payable after a production has completed all its qualifying spend (called qualifying NZ production expenditure or QNZPE). This means a production doesn’t have to wait until the end of the tax year to submit its application like in other countries. The only involvement the Inland Revenue Department (IRD) has is to verify that the amount of the QNZPE claimed matches its tax records.
Secondly, the NZSPG has different rebate levels depending on the type of production. International productions (usually those productions funded by studios without any NZ content) may qualify for 20%. A smaller number of international productions may qualify for a further 5% (called the 5% uplift) if they can show the production has significant economic benefits for NZ and its screen sector. NZ productions (those with significant NZ content or that are official co-productions) may be entitled to 40%.
Thirdly, the rebate is only paid on QNZPE, not on the total budget. QNZPE is defined differently for international and New Zealand productions but is generally all about where the goods or services are being provided, not who is providing them. Overseas cast and crew fees are qualifying for the time they are in NZ. Generally, NZ cast and crew fees are not qualifying if they are provided offshore (except in limited circumstances for NZ productions).
Myth 2: Only The Hobbit and Avatar would ever be able to get the 25%
Productions that meet the significant economic benefits test can get the 5% uplift. A production must get points in each of the four sections. Section A covers the size of the spend, section B the range of NZ production activity, section C is NZ personnel, and section D wider economic benefits. There are three ways a production can meet the test:
- The standard route – these productions have to score at least 20 points on the test with mandatory points in sections A and D. This means they have to spend QNZPE of at least $25m (TV) or $30m (film), do a wide range of activity in NZ (shoot, post, design), engage significant local personnel, and bring wider economic benefits to the country.
- The ‘frequent flyer’ route – if an applicant has recently had a certain level of repeat business ($100m QNZPE in the previous five years), they can skip to section D.
- The ‘big spender’ route – if an applicant is going to spend a large amount of money on a production ($80m TV or $150m film), they can skip to section D.
Large-budget feature films may find it easier to meet the test through options 1 and 2 above, but TV series have a good chance of coming through option 3 as they tend to do a lot in NZ.
So far, only Power Rangers: Dino Charge has met the test using the standard route.
Myth 3: Power Rangers got the additional 5% by hiring some interns
Power Rangers qualified under option 1 above. They met the minimum required QNZPE to take the test ($25m), are doing a wide range of activity in NZ (shoot and post), and hiring many local cast and crew in key positions. In order to meet the section D requirements, there is a detailed marketing strategy that enables NZ screen agencies to use the show to promote the country as a screen production destination. They have a NZ character as one of the core rangers which will lead to further NZ references throughout the season, and they have engaged writing and directing interns. Provided they deliver on all their obligations for the 5% uplift, the grant will be paid out once they have completed all QNZPE (likely once post is finished in 2016).
Myth 4: You have to be able to write NZ into your script to get the 5%
No, but it could help. All productions need to get at least two points from section D1 (marketing, promoting, and showcasing NZ) and/or D2 (placement of NZ in the screen production). They could get 1 point in D1 and 1 point in D2 like Power Rangers or they could get both points in D2 if, for instance, a whole film was set in NZ (for example NZ as NZ, not as Middle Earth). We know that few productions will have the ability to write NZ into the script.
If NZ can’t be written in, like where the production has a fantasy setting or where NZ is doubling for another country, then the production needs to showcase NZ as more than a screen production destination. This is likely to involve entering into a co-marketing agreement with another government agency such as Tourism NZ so that the film can be associated with NZ to further the goals of that agency (for example NZ being the home of Middle Earth to drive tourism). It could be harder for films that do not have a location shoot element to showcase NZ as a tourism destination, but other agencies may be interested in using the film to market the country as a place to live, study, do business, work, etc. The NZFC and Film NZ are working together to provide more guidance on ways productions can access these points. As more productions apply, we’ll be able to give more examples.
Myth 5: If you build a studio then you will get the 5%
Investment in infrastructure can earn points for the 5% uplift, so building a studio is highly likely to earn points, as might taking some risk on infrastructure above and beyond just renting studio space for the shoot period. Productions would still need to meet the other elements of the test.
Investment in infrastructure is not just about physical assets. It could also be investment in business capability beyond the production (for instance, an opportunity for a NZ company to be involved in merchandising or a game of the film).
The NZFC is currently recruiting for an international relations manager (incentives). We envisage that the person who fills this role will assist applicants for the 5% uplift to develop strong, achievable, and innovative ideas to support their applications.
Myth 6: The NZFC decides who gets the 5%
When the NZFC receives an application that might meet the test, the NZFC convenes the significant economic benefits verification panel comprised of seven people – one each from the NZFC, Ministry for Culture and Heritage (MCH), Tourism NZ, and the Ministry of Business, Innovation, and Employment (MBIE), along with two commercial people and one industry representative. We try to convene meetings within four weeks of receiving a valid application. There is often discussion between applicants, the NZFC, and Film NZ before the application is submitted. If the panel agrees that the production meets the test, a more detailed memorandum of understanding (MOU) will be negotiated. We intend to publish summaries of each MOU on the NZFC website as they are agreed.
Myth 7: The government has already paid out lots of money under the new grant
The grant is generally only paid out once a production is completed and the amount of the QNZPE has been audited and verified. It usually takes about six months from completion for a grant to be approved. Only productions that started shooting after 1 April 2014 are eligible for the new grant, so it will take a while for the first productions to be paid out under the new grant. However, interest in both the NZ and international grant has been high since details were published in April 2014, and a number of productions have started shooting since then with the expectation that they will be eligible for the new grant.
Productions that want to apply for the 5% uplift or are close to the threshold can apply for initial assessment. This is what Power Rangers did.
Independently funded NZ productions usually apply for provisional approval prior to shooting. Since the new grant regime came in, seven NZ productions have received provisional approval (four films and three TV series). Of these seven productions, four are official co-productions.
Myth 8: The new grants are so popular that NZ is now full
The new grants have certainly stimulated interest in NZ, and we expect it to be busy next year, but we are not at full capacity. We suggest people talk to Film NZ for further information on capacity.
