New EMDG updates: what they mean for your SME export strategy

The Export Market Development Grants (EMDG) program has been the Federal Government’s longstanding flagship program for supporting Australian small and medium enterprises (SMEs) aiming to expand into international markets.

Established in 1974, the program’s rich history has been overshadowed by significant challenges in recent years. Following a government review, maximum grant amounts were drastically reduced - plummeting from $150,000 in 2021 to $28,000 in 2023. Average grant amounts also dropped significantly during the same period. These reductions have raised serious concerns about the program’s future viability.

Recent developments have sought to address this, with Austrade, the entity responsible for administering the program, announcing that Round 4 of the program will launch in November 2024, following a strategic refocus in 2023 aimed at revitalising the EMDG initiative.

This latest round includes significant adjustments that reflect the findings of this refocus. The overview of the key changes include:

• Maximum grant amounts: The new tiered system establishes clear expectations for funding, potentially offering larger sums for eligible applicants compared to previous rounds
• New allocation approach: A major shift from previous rounds, Austrade will now employ a ‘first come, first served’ system for assessing applications. Once the allocated funds are exhausted, no further grants will be available, making early submission critical
• Eligibility criteria updates: Substantial updates include stricter minimum annual turnover requirements, aiming to streamline the applicant pool by ensuring only those businesses with a viable export strategy and financial capacity qualify for funding
• Introduction of specific target markets: The program will now prioritise certain international markets, particularly those in Southeast Asia, in line with Australia’s Southeast Asia Economic Strategy, as well as other significant markets like the US, UK, India, and China
• New criteria for representative bodies: These entities will need to demonstrate their contributions to SMEs through specific export marketing activities and training programs, enhancing transparency and accountability
• New compliance measures: The program will enforce stricter probity requirements, ensuring that applicants adhere to ethical standards and comply with all tax obligations, further safeguarding Australia’s trade reputation.

Below, we take a closer look at the program’s key Round 4 changes and provide an expert perspective and comment on what they mean for Australian SMEs.

Change: Maximum grant amounts per tier

Rather than the model used to determine grant amounts in previous rounds, whereby the total program funds were divided among all eligible applicants, maximum grant amounts have been set across all tiers for Financial Year (FY) 2025-26 and FY 2026-27 as follows:

• Tier 1 (ready to export): $20,000 up to $30,000 per FY
• Tier 2 (exporting within existing markets): $20,000 up to $50,000 per FY
• Tier 3 (exporting to new key markets): $20,000 up to $80,000 per FY
• Representative bodies: Up to $50,000 per FY (no minimum amount).

Successful EMDG applicants will be relieved with these larger grant amounts, but, as always, attention to detail is crucial. Eligibility criteria have been tightened across the program and for each tier. Because EMDG continues to operate with a fixed pool of funding, eligible applicants can no longer be certain of being offered a grant agreement.

What is the new approach to assessment and allocation?

Whilst EMDG remains an entitlement program and will not be competitive, Austrade will now take a ‘first come, first served’ approach to application assessments and fund allocations. In Round 4, applications will be assessed, and grants will be offered in the order they are received, until all funds have been allocated to eligible applicants.

Once allocated funds are exhausted, the grant round will be closed. This is a significant shift from the previous approach, whereby all eligible applicants received a share of grant funds. However, previously the amounts received were unpredictable and dependent on the number of eligible applications, so the new changes provide more clarity around allocation for successful applicants.

Because demand is expected to remain high, we expect this approach to create a significant rush to lodge applications and many eligible applicants are likely to be disappointed.

How have the eligibility criteria for SMEs changed?

EMDG Round 4 includes substantial updates to the eligibility criteria for SMEs, which Austrade says are designed to help exporters who are most likely to succeed across different stages of their export journey.

The key changes for SMEs to be aware of include the following.

• Minimum annual turnover requirements: To be eligible for Round 4, businesses must have a maximum annual turnover of less than $20 million for FY 2023-24 and meet new minimum annual turnover requirements (also for FY 2023-24) for each tier:
  • Tier 1: $100,000
  • Tier 2: $500,000
  • Tier 3: $1 million.
• Businesses must be able to spend at least $20,000 of their own money on marketing and promotional activities – exclusive of grant funds
• Tier 3 applicants must now be expanding their exports to new markets that fit Austrade’s definition of ‘key markets’ as below
• Tier 1 applicants now need to complete approved export training and/or an Austrade test to show they are ready to export and have the required skills
• Calculations towards the eight financial years that businesses can receive EMDG grants for will now be based on entering into a grant agreement, or the number of grants paid in the previous reimbursement scheme. If a business in a grant agreement with Austrade does not spend money on eligible promotional activities and chooses to ‘opt out’ of a grant year, it will still lose that year from its total of eight years’ worth of EMDG
• New limits on the number of years businesses can access specific tier grants:
  • Tier 1: Two years
  • Tier 2: Four years
  • Tier 3: Four years.

Unfortunately, these changes mean that many businesses that may have previously been eligible will no longer qualify. For example, if a business has a turnover below $100,000 it will not be eligible, nor if it has previously exported but has a turnover below $500,000. Ultimately, we see these changes as being designed to reduce the pool of applicants and ease the well-publicised oversubscription to EMDG. Previous measures under the much older reimbursement scheme (such as the ‘export performance test’) have been used to achieve this in the past.

Introduction of specific target markets for grant tiers

The EMDG now includes the potential for Austrade to provide grants that target specific markets for different grant tiers. For example, in Round 4, the eligibility criteria for Tier 3 specifies that applicants must be already exporting, but also seeking to diversify activities into new key markets.

These key target markets prioritise Southeast Asian countries in line with Australia’s Southeast Asia Economic Strategy, but also include the US, the UK, much of Europe, India and China among others. Find the Tier 3 eligibility criteria and the full list of key markets on Austrade’s website.

The list of target markets is broad, but it may present challenges, as the Government’s selections may not align with the needs of every industry or exporter.

What are the changes to eligibility criteria for representative bodies?

The guidelines for EMDG Round 4 include changes which Austrade says are designed to provide more transparency and accountability for representative bodies’ use of grant funds, and to ensure their activities benefit more of their SME members.

In addition to other criteria, the eligibility requirements for representative bodies now include:

• Undertaking new export marketing and promotional activities on behalf of SME members, which must be outlined in a high-quality plan
• Providing export training to SME members to help them become export ready and increase their export skills, the plans for which must be provided to and approved by Austrade upon application.

For further details on these changes, including definitions of new activities and plan requirements, see the criteria for representative bodies and EMDG guidelines on the Austrade website.

Changes to EMDG compliance measures

Increased probity requirements and amendments to the definition of ‘eligible export product’ are both included in the EMDG Round 4 changes.

• Applicants must have complied with all their tax obligations and may be required to provide evidence of this during the assessment process
• Applicants must conduct their business in a professional and ethical manner that poses no risk to Australia’s trade reputation
• ‘Eligible export products’ must be of substantially Australian origin and bring significant net benefit to Australia.

Do you need help with your EMDG application?

Grant applications can be complex and confusing to navigate, particularly when significant changes are introduced. For EMDG applicants, there is now a layer of urgency, as applications must be lodged as soon as possible after the opening date (6 November 2024 for Representative Bodies, and 12 November 2024 for Tier 1, 2 and 3 applicants) to secure a grant.

We can help you understand these changes and assess your eligibility for the EMDG program, including choosing the correct tier to apply under, to help maximise the benefit to your business.

If you have any questions about the new EMDG Round 4 changes or any other government grants, contact us today.