Preparing your 2021 Export Market Development Grant application

Thinking of getting your EMDG claim in from 1 July this year? Here are some important things for you to be aware of this time round.

For decades, the Export Market Development Grant (EMDG) has been offering grants to SMEs that export their products or services to overseas markets.

Traditionally, the grant has offered a 50 percent cash rebate on a series of export related expenses, including overseas-based sales staff, Facebook ads, overseas trips, and many others.

To receive the EMDG, the applicant business prepares a submission outlining all of the relevant expenses, and assuming the assessor deems those expenses eligible, the grant is subsequently paid to the applicant.

In September 2020, Austrade (the Government body that administers the EMDG) announced that the program would be going through a major overhaul, and recently released its draft version of the its new guidelines for public consultation.

Notwithstanding the significant changes announced to the EMDG, eligible expenses incurred up until 30 June 2021 will still be governed by the original program, with the new program opening up to businesses from 16 August 2021 and set to cover expenses relating to 1 July 2021 and beyond.

Despite the traditional rules still applying for expenses incurred up until 30 June 201, the EMDG will look a little different for those applying for expenses incurred throughout the 2021 financial year.

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COVID-19 leniencies removed

In recognition of the impact that COVID-19 on Australian businesses and their ability to export their products and services, Austrade made some notable changes to the way in which the program was delivered. But, Austrade has now flagged that these leniencies were temporary, and the original rules will be reintroduced for the 2021 grant year.

The most notable of these changes was the removal of the ‘export performance test’.

The Export Market Development Grants Act 1997 stipulates that applicants that have received more than two EMDG grants are (in most cases) required to demonstrate that their export activities have led to the generation of export revenue.

To enforce this requirement, Austrade places a cap on the grant amount which is based on a percentage of the company’s export revenue.

For example, third-time applicants, this cap is 40 percent, which means that if even if the company spent $300,000 on eligible expenses, if it only generated $100,000 in export revenue during the grant period, it would only be eligible for a $40,000 grant.

So, if your company is up for its third grant or beyond, be sure to take a look through Austrade’s grant guidelines to familiarise yourself with the cap associated with your export performance test.

Initial payment amount to be reduced heavily

Based on the EMDG’s ‘two-tranche’ payout system, once the Government approves a grant application, only a portion of the funds are released to the applicant entity at first, and the remaining funds are released after all initial payments have been made.

In the few years leading up to COVID-19, the initial payment amount had been consistently capped at $40,000, and the final payouts varied significantly each year – depending on how much money was left in the EMDG kitty.

Once COVID-19 hit, the Government raised the initial payment amount to $100,000 for 2020 applications.

However, Austrade recently announced that initial payments for 2021 grant applications will be $30,000.

Things to remember about the applying for the EMDG this year

Outside of these two changes to the 2021 EMDG application process, there are a number of other important things to keep in mind when applying, including:

1. The EMDG operates on a cash basis, so only expenses that have been both incurred and paid before 30 June can be included in an application
2. Austrade conduct regular review and audits on EMDG applications, and often request supporting documentation as part of their review process. Make sure that any expense being included in the claim can be adequately substantiated
3. While applications are open from 1 July until 30 November 2021, the earlier an application is submitted, the more likely it is to be reviewed quickly. There is no exact science to this, but it is quite common for those who submit in July to be reviewed in August, and for those who submit in November to be reviewed in the following April or May
4. As outlined earlier, the new EMDG program will be launching in August 2021 – but will also be closing on 30 November. Unlike the EMDG in its current form, the new program will be offering funds on a prospective basis instead on a retrospective basis. So if you are intending on continuing to export throughout the 2022 financial year, make sure to get started on 2022 (new) application soon after you complete your 2021 application

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