I Screen Studies

Knowing, directed by Alex Proyas, starring Nicolas Cage, shot in Melbourne with a largely Australian (and New Zealand) cast opened last weekend as the number 1 film at the American box office.  The film took almost US$25 million over the weekend, at an per screen average of US$7384 on 3332 screens over the three days. In its first six days it has taken almost US$30 million.

Knowing is also the latest production to fall into the zone of indecision and uncertainty otherwise known as the Australian tax offset arrangements for film. Last year George Miller’s company had to shelve development of Justice League when it became clear that the film would not qualify for the new 40% producer offset on the grounds that it had not been developed from inception by Australians.  It would have qualified for the 15% tax offset for international productions (as Knowing will do, too), but Miller and Warner Bros decided that this was not enough of an incentive to bring the production to Sydney.

Yesterday Garry Maddox reported in the Sydney Morning Herald on the uncertainty surrounding Knowing, which appears to be unlikely to be granted the 40% offset. The director is unhappy with the prospect of only receiving the 15% offset.

Interestingly Proyas reveals that he turned down a 35% tax incentive from Massachusetts to make the film in Boston (where many scenes are set), in favour of Melbourne which (so the article/Proyas claims) has “similar architecture and landscapes”. Proyas goes on:

“Apart from the fact that it’s set in the US and Nic Cage is in it, everything else about the movie [has] been made by Australians,” [Proyas] said. “All the budget has flowed back to people in this country.

“It’s driven by Australians. I produced the film, I directed the film, I co-wrote the film and it’s been something that I’ve been spearheading for years now.”

The issue of qualification for the 40% tax offset appears to hinge on a project being developed “from inception” by Australians, that is if  Geoff Brown, executive director of the Screen Producers Association of Australia, is correct. He told Maddox

that if Proyas could show he had developed Knowing, he would be happy for it to qualify for the higher incentive. “The key to the producer offset was to get projects generated by Australians with creative control by Australians,” he said.

The eligibility rules are available on the Screen Australia site here. Brown is not the arbiter, but it is reasonable to think that he might have some insight into the process.
The difference between Knowing and Justice League is that the former is a finished production, while the latter was still in development.  The first requirement of the 40% producer offset is that a production must be completed, so while it is surprising that the producers were not certain of the status of the film when the decision to shoot in Australia was made it, seems as though the final decision on whether a film qualifies for the larger offset is not made until it is finished (although the Justice League decision would seem to contradict that point).

Proyas’s point is that the film has generated significant income for Australians, and that a large proportion of the US$55 million budget was spent in Australia.  If the film does not qualify for the 40% offset, Proyas claims, other large budget international productions will not come to Australia on the grounds not only of the cost of producing in Australia but also because of the apparent uncertainty over which projects will qualify for which offset.  Brown (and many other SPAA members and others in the industry) might say “that’s fine, the 40% producer offset is intended to support Australian productions, not American or other productions”. This argument of course ignores the fact that large international productions have a significant impact on the local industry in terms of experience, credits, income, and aspiration in a way that Australian productions of the kind Brown refers to above (that is, developed from inception by Australians and with creative control by Australians) can only partly do.

In my reading of the eligibility rules, Knowing meets most but perhaps not all criteria. It is complete, it is in an eligible format, it met the threshold of ‘qualifying Australian production expenditure’ or QAPE. Perhaps there is an issue over the applicant company not being Australian, though if this was Proyas’s company Mystery Clock this won’t have been a problem. There may also have been an issue about the level of ’significant Australian content’ in the film. Screen Australia provides the following instruction on this thorny question:

What does ‘significant Australian content’ mean?

A project must have cultural benefits for Australia to attract such a high level of Australian Government support. Therefore, Screen Australia must be satisfied that the project has ‘significant Australian content’ for it to qualify for the Offset. In considering this issue, Screen Australia must have regard to the following:

• the subject matter
• the place where the film or program was made
• the nationalities and places of residence of the people who took part in making it
• the details of production expenditure incurred, and
• any other matters that Screen Australia considers to be relevant.

Download Guidance on Significant Australian Content for more detailed information.

Under ’subject matter’, productions set “in a foreign land, with non-Australian characters” (as is the case with Knowing) are “unlikely to be considered to have a strong claim in relation to level of Australian content”, although this is followed by the caveat “Such films may still meet the SAC test, but are likely to need to have strong claims in relation to other relevant matters”.

In fact, there is nothing in the publicly available documentation relating to the 40% offset that states specifically that a production must be “generated by” Australians, or that Australians must have been involved in development “from inception”, despite the fact that the latter was the reason given for Justice League being ineligible for the 40% offset. There is a note in the Guidance document on significant Australian content (which is one of the requirements that a production must meet in order to qualify for the offset) in the section on “Any other matters that the film authority considers relevant” discussing “core origination”

“core origination”: the extent to which the initial concept, idea or underlying work is created by Australians and the extent to which the development of the project originated in Australia and is controlled and owned by Australians;

which would suggest that involvement in development, and the time that Australians came on board is open to interpretation. According to the production notes on the film’s official site, Knowing was bought by producers Jason Blumenthal and Tod Black as an original pitch by writer Ryne Douglas Pearson. They worked on the script for three years before involving Alex Proyas, who has been involved in the project for the last five years.

Reading the guidance on significant Australian content, it appears that the issue over “core origination” could be balanced against “length of association”

“Length of association“: the extent to which Australian writers, producers and directors have been involved in the development of the project.

And then there is the ultimate clause which states “Screen Australia will also consider any other factors it considers relevant to a specific
film project on a case by case basis”. In other words, the authority can count or discount any of these factors and make a determination as it sees fit on any grounds. This doesn’t strike me as particularly transparent, and appears open to inconsistent interpretation which I would imagine would be the last thing producers and accountants would want.