Is the Australian VFX industry on borrowed time?

With foreign tax subsidies under scrutiny in the US, is Australia’s VFX industry in danger of losing its biggest clients? Lee Zachariah investigates.

The rise and rise of Australian visual effects houses happened so quickly, we almost didn’t notice.

Without taking anything away from the talent and business savvy of firms such as Deluxe, Cutting Edge and Fuel VFX, there’s little doubt that the fraught state of affairs in the US has played a big part in this. Only two weeks before winning an Oscar for the Life of Pi’s visual effects, American VFX house Rhythm & Hues filed for bankruptcy, unable to compete in the very marketplace in which it had established itself as a leader. Soon after this, an anonymous blogger and self-described “VFX pro” by the name of VFX Soldier used crowd-sourced funds to commission a Washington DC law firm to look into foreign tax subsidies. With today’s technology, sending VFX work overseas to cheaper firms seems like the logical choice for an industry increasingly reliant on post-production trickery and there are added benefits for those wishing to do this. Like many other countries, Australia offers a rebate on any post-production and visual effects made in Australia. At a Federal level, the rebate is 30 per cent, with various states offering their own incentives on top of that figure.

In layman’s terms, that means any post-production work completed in Australia for overseas companies gets 30 per cent of its tax back – a percentage that can increase based on the state the work is completed in.