The AAT has upheld a decision of Screen Australia which held that certain expenditure by the applicant was not incurred by the applicant for the purpose of qualifying for a refundable film tax offset.

The applicant (Creation Ministries) is a not-for-profit corporation that seeks to affirm the reliability of the Bible. It made a film concerning the impact of the life and work of Darwin and made application to Screen Australia for a final certificate for producer offset pursuant to s376-65 of the ITAA 1997. The applicant claimed to have incurred “qualifying Australian production expenditure” totalling $780,069. However, Screen Australia determined the qualifying Australian production expenditure to be $452,518. Of the balance, $47,463 was held not to qualify for reasons not in issue in these proceedings and $288,008 was held not to have been incurred by Creation Ministries, but by Fathom Media (a company incorporated in connection with the production of the film, of which a person associated with Creation Ministries was its only member and sole director – Fathom Media acted as the trustee of a discretionary trust that included Creation Ministries amongst its beneficiaries).

The case concerned whether Creation Ministries “incurred” the $288,008. The AAT said Creation Ministries loaned funds to Fathom Media over several years.

After reviewing the matter, the Tribunal found that the relationship between Creation Ministries and Fathom Media was one of lender and borrower. It said that Creation Ministries was never under a “presently existing liability”; it was not “definitively committed” nor “completely subjected” to, the amounts paid by Fathom Media to discharge its contractual obligations to suppliers and other third parties. Fathom Media was the contracting party; it was the entity that incurred the expenditure, the AAT said. Creation Ministries did not incur the expenditure by lending Fathom Media sufficient funds to discharge the contractual debts that Fathom Media incurred.

Screen Australia’s decision was therefore upheld.

(Re Creation Ministries International Ltd and Screen Australia [2015] AATA 250, AAT, Hack SC DP, File No: 2014/4749, 24 April 2015.)

[LTN 80, 29/4/15]