Why do we need a live performance production incentive?

Live performance is a complex, collaborative and inherently risky business.

New productions generally require years of development and large upfront investments (from hundreds of thousands up to millions of dollars) before they are presented to audiences for the first time. The development and production costs are all carried by the producer, drawing on their own resources or support from investors.

Significant increases in production and touring costs have made it much more challenging to bring new productions to the stage. Consequently, producers are scaling back or not proceeding with new productions.  Tighter operating margins mean reduced development times which can affect creative quality and impact, fewer new productions, shorter seasons and less touring, which leads to fewer employment opportunities for artists, creative, technical and production staff.

The Australian market presents unique challenges for producers who face much higher production and touring costs to reach more geographically diverse audiences compared to international markets. Increased costs mean touring footprints across Australia will be much smaller, meaning audiences in metropolitan and regional locations may miss out altogether due to the prohibitive cost of moving a production around the country.

What are the benefits of a production incentive?

A production incentive enables producers to mount productions, support touring, and develop the next generation of creative talent, including our independent and small to medium companies.

It’s revenue-positive for government. Economic modelling undertaken by EY for Live Performance Australia shows a 40% incentive for live theatre would return $1.26 in tax revenue for every dollar in tax foregone.

It works across the commercial and not-for-profit sectors and would promote greater collaboration between them.

It makes Australia internationally competitive for investment. It will help to grow the pool of prospective local investors as well as attract investment from overseas.

Not-for-profit companies can recoup production expenses which can be reinvested in new works, improving their financial sustainability.

It underwrites the creation of original works leading to licensing and export opportunities which returns royalties back to Australian creators and rights holders.

It provides equitable treatment for theatre and orchestras, alongside the screen and digital games industries.

It creates jobs and stable career pathways for Australian artists, creatives, and production and technical workers.

It supports ambition. Young Australian writers and producers working in small companies could see their creative visions grow into internationally distinctive productions that compete on the global stage.

It is activity-driven. The incentive is paid on actual expenditure in new productions, meaning it has a tangible and measurable impact.

It makes touring of productions more financially viable. Without a production incentive, touring pathways will continue to shrink due to cost pressures, including for major cities such as Adelaide, Canberra, Hobart and Perth as well as regional centres.

More Australian productions will be able to tour internationally, earning export income and growing global opportunities for Australian creativity.

A thriving live performance sector bolsters tourism, hospitality, and local businesses, enriching our communities and enhancing Australia’s position on the world stage.

Simon Militano, Acting CEO of Opera Australia, explains the benefits of a production incentive for Australia’s performing arts companies.

Universal application

A Live Performance Production Incentive would have universal application across commercial and not-for-profit organisations.

It would assist small and large producers across a wide range of performance categories. It delivers benefits through the creative ecosystem from writers to performers, production and technical workers and venue staff.

It supports Australian-made creativity in our regions, major cities and internationally.

Cost efficiency

The production incentive would be revenue positive for government.

Economic modelling commissioned by LPA shows a 40% incentive for live theatre would return $1.26 for every dollar foregone in tax.  It would generate an additional 4,151 jobs and add $1.5 billion in economic activity. (See here for further detail.)

Investment and expenditure decisions would be made by producers who also deliver the development and production activity. The production incentive is claimed on completion of those activities.

There is an established precedent for this type of production incentive in Australia, in particular the incentive and tax offset schemes already in place for the screen and digital games industries, supported by federal and state and territory governments.

• Australian Screen Production Incentive
• Digital Games Tax Offset

The production incentive could be delivered as a refundable tax offset aligned with the principles and processes of the provisions already in the Income Tax Assessment Act 1997, such as Divisions 376 (screen) and Division 378 (digital games).

Fairness is one of the principles for good tax policy, as well as neutrality and economic efficiency, simplicity and integrity.

On this basis, there is a compelling case for the principles behind screen and digital games incentives to be extended across the arts and creative industries, including live theatre and orchestras. The incentive would apply to commercial and not-for-profit entities and be accessible to organisations of all sizes.

Australia is also missing out on local and international investment in new productions to those markets which already offer generous production incentives, including the UK.  London’s West End is a more attractive investment proposition for Australian investors than the local market.  Levelling this playing field will enable Australian producers to attract investment, employ more of our homegrown talent, build career pathways, and grow our cultural exports.

Sustainability

The production incentive would stimulate investment in live performance productions by attracting private investor support from Australian and international investors.

It would make Australia a more attractive investment destination, grow the pool of available investment capital, and boost the capacity for not-for-profit organisations to reinvest in new productions to support their long-term growth and sustainability.

The production incentive is not a substitution for direct public investment, which will continue to play a crucial role in supporting our creative and cultural organisations.

Current levels of public investment must be maintained and indeed increased to help arts and creative organisations and businesses:

• sustain, adapt and grow their operations;
• meet government expectations set out in the National Cultural Policy, Revive; and
• meet the policy objectives of state and territory governments.

There is strong international evidence which points to the industry-shaping impact of production incentives, such as the UK’s Theatre Tax Relief (TTR) and Orchestra Tax Relief (OTR), which have been in place for more than a decade.

The UK TTR and OTR rates were increased to support industry recovery from the COVID-19 pandemic and have been retained at those higher levels due to their positive impact for the UK’s arts and cultural sector. Indeed, the incentives are also accessed by Australian producers to develop new productions offshore due to the cost benefits available through tax relief.