For a production accessing the Producer Offset, the preferred structure is usually the combination of a production company and a Special Purpose Vehicle (SPV). The SPV is a Pty Ltd company established specifically for an individual production.
Using an SPV keeps the production’s finances and activities separate from those of the broader production company, including isolating the Producer Offset from other company liabilities, and allows the SPV to be wound up cleanly once the production is complete.
In the screen industry, “SPV” simply refers to a company established for a specific production. It is not a separate type of company or legal structure.
Let’s dive into the details of an SPV, and find out why it suits a film or TV production specifically. Here’s how it works and what it protects you from (and no, it’s not a car).
Why set one up?
An SPV helps you control risk and improve record management. Under an SPV you can manage all business operations for a production in a single place.
In addition, sole traders, trusts and partnerships aren’t eligible for QAPE so an SPV provides the necessary company structure to claim the Producer Offset.
Because the SPV and the main production company are two separate legal entities, invoicing for certain items is more clear-cut. The SPV might pay the production company for overheads, producers fees or other expenses. This keeps the costs of your production clear and segregated from other expenses not related to the project.
An SPV also ring-fences your rebate (the Producer Offset) from any other tax liabilities that the production company may have, which is particularly important when the project is being financed.
By establishing a separate SPV for the production, a lender can have greater confidence that the Producer Offset generated by that production will be available to repay the loan, rather than being affected by unrelated tax liabilities of the production company.
Another reason an SPV is recommended if you are looking to access the Producer Offset is that you can clearly ‘wind-up’ the entity at the end of the production, leaving no loose ends. This clarity in bookkeeping takes some of the pain out of the process of applying for the Producer Offset.
Using an SPV also allows you to change the tax year-end for an individual production to ensure there are no delays in receiving the Producer Offset from the ATO. This means that the year-end for the production company remains the same over the long term, regardless of each project.
What happens when the production is finished?
The Producer Offset is paid into the SPV as a tax rebate and is often used to pay outstanding production costs or repay production financing. Once those obligations have been met, any remaining funds will need to be appropriately transferred or distributed from the SPV before the SPV can be wound up. You can read more in our article on common production funding options.
We’ve also prepared a checklist of things you should consider to get your Producer Offset funds out of your SPV.
Understanding and setting up the correct business entities seems complex, but it doesn’t have to be. In the Australian production industry, good planning is the key to good financial management.
We invite you to contact us if you have any questions or concerns about the business structure of your next production.
A note on this article
Information provided by Above the Line Accounting on this website is general in nature and does not take into consideration your personal financial situation. It is for educational purposes only and does not constitute formal financial advice.