An Act to establish the film licensed investment company scheme, and for related purposes
Part 1—Preliminary
1 Short title [see Note 1]
This Act may be cited as the Film Licensed Investment Company Act 1998.
2 Commencement [see Note 1]
This Act commences on the day on which it receives the Royal Assent.
3 Overview
(1) This Act sets up a pilot scheme. The purpose of the pilot scheme is to encourage investment in qualifying Australian films.
(2) Under the scheme, a company may apply for a concessional capital licence. The shareholders in the licensed companies (FLICs) are able to obtain a 100% tax deduction for money invested in the companies if that money is then invested in qualifying Australian films.
(3) The scheme operates during the period commencing on the day that the Minister grants the first licence (which will occur during the 1998‑99 financial year) and ending on 30 June 2003. During the licence period, up to $40 million will be able to be raised for investment in qualifying Australian films.
Note: For qualifying Australian film see subsection 6(1).
4 Objects of the pilot scheme
The objects of the scheme are as follows:
(a) to encourage the production of qualifying Australian films which portray Australian perspectives and Australia’s cultural diversity;
(b) to encourage the production of qualifying Australian films which are of a high standard and are likely to be commercially successful;
(c) to support and promote the ongoing development of the Australian film industry through encouraging the use of Australia’s creative resources and industry expertise;
(d) to ensure that the level of the Commonwealth’s assistance to the Australian film industry is quantifiable, accountable, and transparent.
5 Extraterritorial operation
Subparagraph 25(a)(v), section 27, Part 3 and the Schedule extend to acts, omissions, matters and things outside Australia, whether or not in a foreign country.
6 Definitions
(1) In this Act, unless the contrary intention appears:
allowable deduction percentage has the meaning given in section 37.
Application rules means the rules made by the Minister under section 9.
bank includes but is not limited to a body corporate that holds an authority under subsection 9(3) of the Banking Act 1959.
concessional capital means money paid to a FLIC by a person for the issue, during the FLIC’s licence period, of shares to that person.
concessional capital licence means a licence granted by the Minister under section 16.
film licensed investment company means a company that has been granted a concessional capital licence under section 16 (whether or not the licence has ceased to be in force).
FLIC means a film licensed investment company.
invested in a film has the meaning given in subsection (2).
licence period, in relation to a FLIC, means the period commencing on the day on which the FLIC was granted a concessional capital licence and ending:
(a) if the licence is revoked—on the day specified by the Minister under section 33 as the day on which it is revoked; or
(b) otherwise—on 30 June 2000.
non‑concessional capital means capital raised by the FLIC after the end of the licence period.
period of the scheme means the period commencing on the day the Minister grants the first licence under the scheme and ending on 30 June 2003.
provisionally certified film means a film that has been issued with a provisional certificate under section 124ZAB of the Income Tax Assessment Act 1936.
qualifying Australian film has the same meaning as it has in Division 10BA of Part III of the Income Tax Assessment Act 1936.
Secretary means the Secretary to the Department.
Selection Advisory Panel means a body established under the Application rules to advise the Minister in respect of applications for a concessional capital licence.
(2) For the purposes of this Act, money is invested in a film if it is:
(a) spent by a FLIC as a contribution to the cost of producing the film for the purpose of becoming the first owner, or one of the first owners, of the copyright in the film when the copyright comes into existence; or
(b) if the FLIC has contributed to the cost of production of a film for the purpose set out in paragraph (a)—spent by a FLIC as a contribution to the cost of marketing and distributing the film.
7 Application of the Criminal Code
Chapter 2 of the Criminal Code applies to all offences against this Act.
Part 2—The pilot scheme
Division 1—Overview
8 Overview of Part
(1) This Part sets out the pilot scheme. Division 2 provides for the Minister to make rules that apply to the application process and to determine criteria and procedures for making decisions as to the grant of licences.
(2) Division 3 provides for the application process.
(3) Under Division 4, the Minister:
(a) determines which applicants to license as FLICs and how much of the $40 million in concessional capital to allocate to each FLIC to raise during the licence period; and
(b) grants the licences.
(4) The conditions that attach to the scheme are set out in Division 6 (although section 22 provides for the Minister to determine further conditions of the scheme in a disallowable instrument).
(5) Division 7 sets out how a breach of a condition is to be dealt with.
(6) Division 8 deals with information and reporting requirements.
(7) Division 9 deals with a purported transfer of a licence and the allowable deduction percentage.
Division 2—Minister to make certain determinations concerning the application process and decision‑making criteria
9 Application rules
The Minister must, in writing, determine rules concerning the application process under the scheme. The rules may provide for all or any of the following matters:
(a) the method of calling for applications;
(b) the closing date for a round of applications;
(c) the form of the application and the documentation that must accompany an application;
(d) the establishing of a Selection Advisory Panel to advise the Minister in respect of the applications including the membership of the panel and tenure of panel members;
(e) the rules governing the operation of the Selection Advisory Panel;
(f) any other matter relevant to the application process under the scheme.
Note: A determination is a disallowable instrument (see section 43).
10 Minister must determine decision‑making criteria and procedures
(1) The Minister must, in writing, determine criteria to be applied and procedures to be complied with by the Minister in deciding:
(a) whether to grant a concessional capital licence under the scheme; and
(b) how many licences to grant under the scheme; and
(c) how much concessional capital to allocate to each FLIC to raise during the licence period.
Note: A determination is a disallowable instrument (see section 43).
(2) The Minister must also determine the weight to be given to each criterion.
Division 3—The application process
11 Rounds of applications
(1) The Minister may call for applications for a concessional capital licence under the scheme from interested persons.
(2) If, in the first round of applications, the Minister does not allocate all of the concessional capital specified in subsection 14(2), the Minister may call for one further round of applications.
12 Applications
(1) A company may apply for a licence to raise concessional capital under the scheme.
(2) The application must:
(a) be in the form specified in the Application rules; and
(b) provide such information as is required by the Application rules; and
(c) be given to the Minister.
13 Further information
(1) The Minister may ask the applicant, in writing, to give to the Minister, within the period specified in the request, further information about the application.
(2) The Minister may refuse to consider the application unless the applicant provides the information within the period specified in the request.
Division 4—Grant of licence
14 Minister to determine number of licences to be granted and amount of concessional capital FLICs are licensed to raise
(1) After receiving applications in respect of the scheme, the Minister must determine:
(a) how many licences to grant under the scheme; and
(b) the amount of concessional capital that each FLIC will be allocated to raise during the licence period.
Note: Section 10 requires the Minister to comply with criteria and procedures determined under that section when making a determination under this section.
(2) The total amount of concessional capital allocated by the Minister to FLICs to raise on or before 30 June 2000 must not exceed $40 million.
(3) The amount allocated to a FLIC under paragraph (1)(b) does not have to be the amount applied for by the FLIC in its application for a licence.
(4) The total amount of concessional capital allocated by the Minister to FLICs to raise on or before 30 June 1999 must not exceed $20 million.
(5) In respect of each FLIC, the Minister must determine the amount of concessional capital that the FLIC is licensed to raise on or before 30 June 1999.
(6) In an application round, the Minister may decide:
(a) not to grant any licences; and
(b) not to allocate all of the concessional capital available to be allocated.
(7) A determination of the Minister must be in writing.
15 Conditions on grant of licence
A company may only be granted a concessional capital licence under the scheme if all of the following conditions are met:
(a) the company is registered under the Corporations Act 2001;
(b) the company has not commenced business or exercised any borrowing power;
(c) the company’s central management and control is ordinarily exercised in a place in Australia;
(d) the chair of the company (however described) and all of the directors of the company are Australian citizens;
(e) the company’s constitution provides that all of the shares in the company are to be fully paid and of the same class.
16 Grant of concessional capital licence
(1) Subject to this Part, the Minister may grant a company a licence to raise concessional capital.
(2) A company that has been granted a licence is a film licensed investment company (FLIC).
17 Form of licence
(1) A licence under the scheme must:
(a) be in writing; and
(b) state that the FLIC is licensed to raise the amount of concessional capital determined by the Minister under paragraph 14(1)(b) in respect of the company during the licence period; and
(c) state that the FLIC is licensed to raise the amount of concessional capital determined by the Minister under subsection 14(5) in respect of the company during the period commencing on the day the FLIC’s licence is granted and ending on 30 June 1999; and
(d) state the conditions of the scheme to which a FLIC is subject; and
(e) state that the conditions of the scheme determined by the Minister under section 22 may be altered at any time after consultation with the FLICs.
18 Minister is to have regard to recommendations of Selection Advisory Panel
The Minister must have regard to the recommendations of the Selection Advisory Panel in deciding:
(a) whether to grant a licence under the scheme; and
(b) the amount of concessional capital to be allocated to each FLIC to raise during the licence period.
Note: For Selection Advisory Panel see subsection 6(1).
19 Notice of refusal to grant licence
(1) If the Minister refuses to grant an application for a concessional capital licence, the Minister must notify the applicant in writing of the refusal.
(2) The notice must include the reasons for the decision.
Division 5—Term of licence
20 Term of licence
A concessional capital licence comes into force when granted and remains in force until:
(a) if it is revoked—the day specified by the Minister under section 33 as the day on which it is revoked; or
(b) otherwise—30 June 2000.
Division 6—Conditions of scheme
21 General
(1) The conditions of the scheme may be found in:
(a) sections 23 to 28; and
(b) a determination made under section 22.
(2) The conditions apply for the period of the scheme.
Note: The scheme ends on 30 June 2003.
22 Conditions in a disallowable instrument
(1) The Minister may determine in writing conditions that are to apply to all FLICs under the scheme.
Note: A determination is a disallowable instrument (see section 43).
(2) The Minister may revoke or vary these conditions (including adding new conditions) at any time after consulting each of the FLICs.
23 Fundraising conditions
A FLIC must comply with the following conditions as to raising capital:
(a) the FLIC must not raise more than the amount of concessional capital it is licensed to raise (whether in respect of the licence period or the period commencing on the day on which the FLIC’s licence is granted and ending on 30 June 1999);
(b) the FLIC must not issue debentures or convertible notes;
(c) the FLIC must not borrow money during the licence period except during the 1998‑99 financial year and then only for the short‑term purpose of meeting the costs of its administrative expenses;
(d) the FLIC may raise non‑concessional capital but not before 1 July 2000.
24 Investment conditions
A FLIC must comply with the following conditions as to investment of capital raised under the scheme:
(a) the FLIC must invest in provisionally certified films an amount equal to the amount of concessional capital raised by the FLIC less the allowable deduction percentage;
(b) the amount must be so invested on or before 30 June 2002;
(c) if the FLIC invests concessional capital in a film, the FLIC must not also invest non‑concessional capital in that film.
Note 1: The Minister determines an allowable deduction percentage under section 37.
Note 2: For provisionally certified film see subsection 6(1).
25 Film conditions
A FLIC must comply with the following conditions in respect of a film it invests in under the scheme:
(a) the film must not be developed or produced by a person who is:
(i) the holder of a licence allocated by the Australian Broadcasting Authority under the Broadcasting Services Act 1992; or
(ii) the provider of a broadcasting service in accordance with a class licence determined by the Australian Broadcasting Authority under section 117 of the Broadcasting Services Act 1992; or
(iii) the Australian Broadcasting Corporation; or
(iv) the Special Broadcasting Service; or
(v) an associate of one of the persons mentioned in subparagraph (i) or (ii); and
(b) the film must receive a final certificate under section 124ZAC of the Income Tax Assessment Act 1936 on or before 30 April 2003.
Note: For associate (and for other definitions relevant to the definition of associate) see Schedule 1.
26 Preconditions and conditions in the Minister’s determination under section 22
A FLIC must:
(a) continue to comply with the conditions on grant set out in paragraphs 15 (a), (c), (d) and (e); and
(b) comply with the conditions set out in a determination made under section 22.
27 Ownership condition
(1) A FLIC must not have an unacceptable level of foreign ownership or an unacceptable level of individual ownership.
(2) For the purposes of this Act, a FLIC has an unacceptable level of foreign ownership if a group of foreign persons hold, in total, a particular stake in the FLIC of 33% or more.
(3) For the purposes of this Act, a FLIC has an unacceptable level of individual ownership if a person holds a particular stake in the FLIC of 33% or more.
(4) Schedule 1 sets out definitions of expressions used in this section.
Note 1: The limits on the ownership of a FLIC relate to a person’s stake in the FLIC.
Note 2: For stake see Schedule 1.
28 Other conditions
A FLIC must comply with the following conditions:
(a) the FLIC must not purport to transfer its licence to another person;
(b) the FLIC must comply with the reporting requirements set out in the determination made under section 34;
(c) the FLIC must notify each shareholder in writing of any decision taken by the Minister in relation to the FLIC under section 32 in respect of a breach of a condition;
(d) the FLIC must maintain a separate bank account for its concessional capital.
Note: For bank see subsection 6(1).
Division 7—Breach of conditions
29 Minister to notify FLIC of suspected breach of conditions
If the Minister is of the opinion that there may be grounds for deciding that a FLIC is in breach of a condition of the scheme, the Minister must:
(a) give the FLIC written notice of the Minister’s opinion specifying the reasons for the opinion; and
(b) invite the FLIC to make a written submission to the Minister within 28 days.
Note: The conditions of the scheme may be found in sections 23 to 28 and a determination made under section 22.
30 Minister may seek information
The Minister may ask the applicant, in writing, to give to the Minister, within the period specified in the request, information for the purposes of making a decision under section 32.
31 Minister must consider FLIC’s submission and information
In making a decision under section 32 in respect of a FLIC, the Minister must have regard to the matters raised in the FLIC’s submission (if any) and any information received by the Minister under section 30.
32 Powers of the Minister in relation to breaches of conditions
(1) If the Minister is satisfied that a FLIC has breached a condition of the scheme the Minister may decide:
(a) not to take any action in respect of the breach (other than to take the breach into account in determining a course of action in respect of any further breaches of conditions by the FLIC); or
(b) to take action under the following subsections.
Note: A decision of the Minister under this section is a reviewable decision (see section 42).
(2) The Minister may take any or all of the following actions in respect of the breach:
(a) give the FLIC written notice of a day by which the breach of condition must be remedied;
(b) if the breach occurred during the licence period—revoke the licence;
(c) decide to remove the concessional status of shares that were issued to shareholders by the FLIC during the licence period.
Note: Section 375‑865 of the Income Tax Assessment Act 1997 provides that shareholders whose shares are affected by a decision under this paragraph lose their entitlement to a deduction for the shares.
(3) If a FLIC that has been notified of a day under paragraph (2)(a) does not remedy the breach of condition by that day, the Minister may make such decision under subsection (1) as the Minister thinks appropriate.
(4) If the Minister, in respect of a breach of condition by a FLIC:
(a) makes a decision under paragraph 32(1)(a); or
(b) revokes the FLIC’S licence; or
(c) decides to remove the concessional status of shares in the FLIC;
the Minister must, within 28 days of making the decision, notify the Commissioner of Taxation in writing of the decision.
(5) Written notice of a decision of the Minister under this section must:
(a) be given to the FLIC concerned; and
(b) include reasons for the decision.
Note: A FLIC is required as a condition of the scheme to notify each of its shareholders if the Minister makes a decision under section 32 in respect of a breach by the FLIC of a condition (see paragraph 28(c)).
(6) If the Minister’s decision in respect of a FLIC is to revoke the FLIC’s licence, the notice under subsection (5) must also specify the day on which the revocation takes effect.
33 Revocation of licence
(1) The revocation of a licence takes effect on a day specified in writing by the Minister.
(2) The day specified by the Minister must not be a day earlier than the seventh day after the day on which the Minister makes a decision under section 32 to revoke the licence.
(3) If:
(a) the Minister decides to revoke a FLIC’s licence under section 32; and
(b) the FLIC has, at the day of the revocation, raised an amount of concessional capital;
the revocation of the licence does not of itself remove the concessional status of shares issued by the FLIC before the revocation.
Division 8—Information and reporting requirements
34 Reporting requirements
(1) For the purposes of:
(a) monitoring compliance with the Act; and
(b) evaluating the scheme;
the Minister may in writing determine reporting requirements that a FLIC must comply with.
Note: A determination of the Minister is a disallowable instrument (see section 43).
(2) The Minister may only require a FLIC to give a report on 31 December 1998 and at 6 monthly intervals after that.
(3) The Minister may ask the FLIC in writing to give to the Minister, within the period specified in the request, further information concerning the FLIC’s report.
36 Provision of information to the Commissioner of Taxation
(1) The Secretary must advise the Commissioner of Taxation as soon as possible after the end of a financial year of the following information in respect of a FLIC:
(a) the name and registered address of the FLIC;
(b) the details of any breach of conditions by the FLIC during the year;
(c) the details of a decision taken by the Minister under section 32 in respect of the breach;
(d) all other matters that:
(i) the Secretary and the Commissioner of Taxation agree are to be provided; and
(ii) are necessary to the administration of Subdivision 375‑H of the Income Tax Assessment Act 1997.
(2) The Secretary must advise the Commissioner of Taxation as soon as possible after the end of the 1998‑99 and the 1999‑2000 financial years of the following information in respect of a FLIC:
(a) the number of shares issued during the year by the FLIC; and
(b) the names and addresses of the shareholders to whom the shares were issued and the amount paid by each shareholder for the shares.
(3) The Secretary’s advice must be in writing.
Division 9—Other requirements
37 Minister may determine allowable percentage for administrative costs
(1) The Minister may, in writing, in respect of each FLIC, determine an allowable deduction percentage.
(2) The allowable deduction percentage is a percentage of the concessional capital raised by a FLIC that may be used by the FLIC to meet the costs of the FLIC’s administration.
38 Transfer of licence void
The purported transfer of a licence is void.
Part 3—Offences concerning ownership restrictions
39 Meaning of terms used in this Part
Schedule 1 sets out definitions of expressions used in this Part.
40 Acquisitions of shares
If:
(a) a person, or 2 or more persons under an arrangement, acquire shares in a company; and
(b) the acquisition has the result, in relation to a FLIC, that:
(i) an unacceptable foreign ownership situation comes into existence in relation to the FLIC; or
(ii) if an unacceptable foreign ownership situation already exists in relation to the FLIC because there is a group of foreign persons who hold, in total, a particular type of stake in the FLIC of 33% or more—there is an increase in the total of any type of stake held by any group of foreign persons in the FLIC; or
(iii) an unacceptable individual ownership situation comes into existence in relation to the FLIC; or
(iv) if an unacceptable individual ownership situation already exists in relation to the FLIC because there is one or more individuals who hold a particular type of stake in the FLIC of more than 33%—there is an increase in the type of stake held by any of those persons in the FLIC; and
(c) the person or persons mentioned in paragraph (a) were reckless as to whether the acquisition would have that result;
the person or persons mentioned in paragraph (a) are guilty of an offence.
Penalty: 400 penalty units.
Note: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.
41 Anti‑avoidance
(1) If:
(a) one or more persons enter into, begin to carry out or carry out a scheme; and
(b) it would be concluded that the person, or any of the persons, who entered into, began to carry out or carried out the scheme or any part of the scheme did so for the sole or dominant purpose of avoiding the restriction on ownership levels set out in section 27; and
(c) as a result of the scheme or a part of the scheme, a person (the stakeholder) increases the stakeholder’s stake in a FLIC;
the Minister may give the stakeholder a written direction to cease holding that stake within a specified time.
(2) A person is guilty of an offence if the person contravenes a direction under subsection (1).
Penalty: 400 penalty units.
Note: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.
Part 4—General administrative matters of the scheme
42 Review of decisions
A person whose interests are affected may apply to the Administrative Appeals Tribunal for review of a decision of the Minister:
(a) under paragraph 32(1)(a), not to take any action in respect of a breach (other than to take the breach into account in determining a course of action in respect of any further breaches of conditions); and
(b) under paragraph 32(2)(a), to impose a day by which a breach of a condition must be remedied; and
(c) under paragraph 32(2)(b), to revoke a licence; and
(d) under paragraph 32(2)(c), to remove the concessional status of shares that were issued to shareholders by the FLIC during the licence period.
43 Disallowable instruments
Determinations made under sections 9, 10, 22 and 34 are disallowable instruments for the purposes of section 46A of the Acts Interpretation Act 1901.
44 Delegation
The Minister may, by instrument in writing, delegate to:
(a) the Secretary to the Department; or
(b) an SES employee, or acting SES employee, in the Department;
the Minister’s powers under sections 13 and 30 and under subsection 34(3) to ask a FLIC for further information.