Craig McCarthy, “The money men behind the film boom,”
Australian Business, March 4, 1982, pp. 38-45.

While Mad Max caused riots when it opened in Mexico City and the two leads of Puberty Blues were mobbed in Manila, the real stars of the Australian film industry revival, the investors, prefer to keep a low profile in their city offices. Mining magnate Lang Hancock, Rupert Murdoch, stockbrokers, company executives, small investors, all have been quick to spot the generous tax concessions to be had, plus the returns coming from the box office, and are rushing to back new films.

During the early 1950s, the American film industry took the brunt of an anti-communist witch-hunt instigated by Senator Joseph McCarthy’s infamous Un-American Activities Committee. Hundreds of actors and actresses, writers, producers, directors and technicians were hounded out of Hollywood. Many would never work in films again.

According to Lang Hancock — West Australian multi-millionaire mine owner, pastoralist and iron ore exploration and development pioneer — the purge wasn’t successful. That’s why he has become the Australian film industry’s largest private investor.

Last year, aged 71 and recovering from open-heart surgery after an attack the previous Christmas Day, Mr Hancock put $2.5 million into two films, Mad Max II and Now And Forever. He is prepared to invest many millions more, depending on a film’s commercial potential. He has set no limit.

The reason?

“Because a government-subsidised film industry would be just a socialist propaganda machine like Hollywood has become,” he says. “If Australian films are made with private money it will continue our system of free enterprise and you won’t have films such as The China Syndrome being made, which was a whole lot of propaganda about the so-called dangers of nuclear power.”

Mr Hancock’s emergence as the local industry’s biggest single investor comes as the $3.4 million budget Now And Forever starts filming in Sydney. The major new production is completely funded by private money.

It represents significant proof that new tax legislation designed to entice private investors to replace government bodies as the major funders of indigenous films is working. (See separate story [below].)

Other big businessmen are now making substantial contributions to local film financing.

Lawyers, accountants and stockbrokers describe the legislation as extremely complex.

But they have either encouraged clients to invest or gambled on it personally. Figures supplied by the Department of Home Affairs and Environment and industry sources indicate that private investment in local films to be made this year could reach $120 million.

Now And Forever is very much the “baby” of Carnegie (Carnie) Fieldhouse, a conservative, quietly-spoken man who handles the business affairs of Lang Hancock as part of a small but very influential clientele. He describes his operation as a “quiet country practice.” It is very much a family affair with his wife Joan, 28-year-old daughter Brigid and sons Simon, 25 and Tristram, 22, all in his employ.

The last time his photograph was taken was in the early 1950s, by the local newspaper at Wellington, in rural NSW. But the new era of Australian films has brought his anonymity to a sudden end. He advises all the people who advanced the $3 million budget for Mad Max II and when Now And Forever is released his name will be flashed on movie screens throughout the world as its executive producer.

“There’s no ego involved,” “Carnie” Fieldhouse says. “I’m too old and leathery for that. It is simply a title I was given because of my function in the matter. I’m just the hired help.”

A little over a year ago, Mr Fieldhouse (“I approach nobody, instigate nothing”) was contacted by a Los Angeles-based film distribution company called Inter Planetary Pictures. The company’s principals, Max Keller and his wife Micheline, wanted his involvement in a film property in return for the world-wide distribution rights.

The connection came after numerous inquiries and careful consideration and analysis. Australian films were becoming increasingly in vogue; they were considerably cheaper to make than their Hollywood counterparts, the Australian government had introduced attractive new tax incentives for investors and word has reach the US that Mr Fieldhouse was tapped into several large investment sources.

And while the international film industry was convinced Australian filmmakers could produce first-rate historical movies, it remained less sure about their ability to handle the more commercially-appealing contemporary type. Now And Forever’s plot about a modern young couple whose lives are shattered by the husband being charged, convicted and sentenced to prison for rape should, hopefully, change that.

As part of the distribution deal it was agreed that Micheline Keller would be the film’s co-producer to assist a local, Treisha Ghent.

Over a number of months, the commercial and creative strategies of the film were decided. The screenplay, based on a novel by American Danielle Steele, should be contemporary, set in Sydney and, the Kellers were determined, appeal to Americans.

Treisha Ghent contacted Richard Cassidy, a friend who was subsequently commissioned to write the script and direct the film. A significant factor in his appointment was that he had considerable experience working in films and television in the US.

The Kellers also wanted, with Carnegie Fieldhouse’s concurrence, a star with proven appeal to Americans to play one of the leading roles. The final choice was Cheryl Ladd, formerly of the highrating TV series Charlie’s Angels. She plays Jessie Clarke, a successful boutique owner whose writer husband Ian is charged with rape.

Cheryl Ladd’s involvement didn’t contravene an Australian Actors’ Equity ruling against imported stars appearing in local films because Now And Forever is privately backed — unlike the $1.3 million-budget Norman Loves Rose. That film, financed by the Australian Film Commission, almost foundered last year when Equity opposed the casting of American Carol Kane. The deadlock was broken when private investors, including clients of stockbrokers Jones, Grice and Co, replaced the AFC as the film’s backers.

A Sydney-based casting agency, Forecast Consultants, provided local talent to join Cheryl Ladd in Now And Forever. They include Robert Coleby in the role of Ian Clarke, Carmen Duncan, Christine Armor, Aileen Britton, Henry Szeps and John Allen.

John Allen, a film and television veteran of such productions as The Odd Angry Shot, Against The Wind, and A Town Like Alice, plays Clarkes’ lawyers and says Now And Forever is the first local film in which he has worked with a dialogue coach. The coach’s job is to ensure the Australians’ accent aren’t too hard for Americans to understand.

Rea Francis, AFC publicist and personal manager for several local actors and producers, had impressed Mr Fieldhouse and his family in past film dealings and became Now And Forever’s associate producer. The award-winning Don McAlpine, whose credits range back to the start of the Australian film industry’s rebirth in the early 70s, was appointed the film’s director of photography.

Throughout, “Carnie” Fieldhouse kept his clients informed of developments.

Many of the strategy meetings were held in his Sydney office and it was there that the whole package — casting, crew, investors, distribution deals and budgeting — was put together.

The office is on the 9th floor of Hope House, 45 Macquarie Street, Sydney. The building is named after Lang Hancock’s wife and other tenants include one of his subsidiary companies, Hancock Prospecting Pty Ltd and the NSW Film Corporation.

“Carnie” Fieldhouse’s sober figure and the Dickensian flavour of his office — housing, he claims, the most extensive private collection of law volumes in the southern hemisphere — is what the new Australian film era is all about. His big business hardheadedness runs contrary to the garrulousness for which the industry has long been renowned.

Lang Hancock’s throaty drawl and forthright delivery seem to violate the Fieldhouse sanctum. “If the Australian film industry continues as a free enterprise then I’ll remain with it,” he says. “But if the government steps in and socialises it, then it will be another matter.

“I don’t go out much these days so I don’t see the films and I don’t take much interest in what the films I invest in are all about.

“I’ve invested for a variety of reasons but the main one is that I don’t want to see the Australian film industry turning into a socialist propaganda machine like Hollywood has. It has disturbed me to see what a mess Hollywood has made with the propaganda in American films.

“I’m acting mostly for selfish reasons. My grandchildren are seventh generation Australian and after extensive travelling I think this is the best place in which to live and I’d like, for my grandchildren’s sake, for it to remain that way.”

“Carnie” Fieldhouse steers clear of discussion on the 1981 film industry tax concessions which have affected him and the industry so much. But he has formed views already about the future direction of Australian films.

“To continue to be successful and accepted overseas will require more business direction and detailed administrative control,” he says. “The trend will be towards bigger and bigger budgets and the degree of sophistication those bigger budgets generate is already obvious in films such as Mad Max II. I think we’ll be looking at budgets of $7-$10 million in a very short time and I can see the day when big public companies might wish to get involved in film investment.”

That day has arrived. Last year the Brisbane-based diversified trader and investment group GWA Ltd advanced $7 million towards the budgets of several local films. This was despite being involved in the $68 million takeover of UPL Group Ltd, which began last year.

The company’s chief executive, Barry Thornton, says the biggest investment was $4 million in The Pirate Movie, now being filmed in Melbourne. It was placed through a GWA subsidiary, Westco Motors. Westco has the franchise to sell Mazda vehicles in Queensland, NSW, the Northern Territory and South Australia.

“We’ll continue to invest in Australian films as long as the government encourages it through the tax incentives,” Mr Thornton says. “But at the same time we’re very selective about the quality and type of film in which we invest.”

Surprisingly, several major private investors said the tax incentives were not the major factor in their decision. “Certainly I was motivated by the government declaring it was sharing the risk involved in investing in Australian films but there are plenty of other ways you can avoid tax while wasting money,” says Barry McDonald, a 43-year-old Sydney businessman with seven children.

Mr McDonald runs the Macbro Plant Hire Group with his younger brother Noel. It has several branches throughout Sydney’s western suburbs, about 60 employees and an annual turnover of about $5 million. Last year he invested “in the order of” $1 million in Mad Max II and has a further $750,000 in Now And Forever.

“I’m very much an Australian and very interested in Australian ventures,” he says. “I find they either have their feet on the ground or they’re completely hopeless and it’s not extremely hard to distinguish between the two.

“The names of Mel Gibson (star of Mad Max and Gallipoli) and Cheryl Ladd mean nothing to me and if I go to the movies I invariably fall asleep. But I’m a patriot, I’m impressed by the fact that Australian movies are being very well received around the world and that they have a reputation for quality. And I’m impressed by the business acumen shown by the people involved in the two films in which I’ve invested.”

So was Mr McDonald’s colleague John Brookfield, 36, head of Viking Equipment Pty Ltd, a Sydney-based industrial plant and equipment manufacturer and retailer. Mr Brookfield last year committed $600,000 to Mad Max II and $400,000 to Now And Forever.

“I was extremely impressed by the calibre of Mad Max’s producer (Byron Kennedy) and director (George Miller),” Mr Brookfield recalls. “Subsequent to that I decided to invest in Now And Forever because it’s very important to have top legal people handling the affair. I think Carnegie Fieldhouse has dotted every ‘i’ and crossed every ‘t’.”

With the investors assembled, Mr Fieldhouse, in consultation with Treisha Ghent and Richard Cassidy, set the budget for Now And Forever at $3.4 million after casting and crew had been finalised, laboratory costs and equipment hire fees established and salaries of all personnel settled. His word and reputation were enough for clients to commit a total of $2,150,000 to that budget. Mr Fieldhouse and “a handful” of others contributed the remaining $1.25 million.

He refuses to say how much he personally invested. But it is normal practice in Hollywood and elsewhere in the film world for an executive producer to be appointed to a film in which he or she is the major investor or when the major investors insist on someone retaining overall control of the film on their behalf.

Treisha Ghent then applied to the institution section of the cultural affairs branch of the Home Affairs Department for the certificates signifying that, under the terms of the film tax legislation, Now And Forever was an Australian film and eligible for tax deductions.

Les Nielsen, head of the branch, confirms that up to December 11 last provisional certificates, which are issued to Australian productions until they are replaced by final certificates on a film’s satisfactory completion, had been issued to 105 feature films, eight telemovies, 89 documentaries and four television mini-series. Final certificates have been granted to three feature films and four documentaries.

Of the 419 film certificate applications received so far, eight were rejected. Such is the backlog, Mr Nielson says, that there is a two-month waiting list of producers anxious to discover if their certificate applications are successful. “But we can’t even guarantee them that,” he says. “It could be longer — three months in some cases — and there is the continuing problem of applicants not furnishing enough information.”

With the average Australian film budget now close to $1.5 million, the extent of private investment in local films can be judged. AFC chairman, former merchant banker Joseph “Joe” Skrzynski, says private investors now account for an average 76 per cent of a film’s budget. Government film bodies — the AFC and the six state film corporations or councils — and the three exhibition and distribution networks — the Greater Union Organisation (GUO), Village-Roadshow (Roadshow Distributors Pty Ltd and Village Theatres Ltd) and Hoyts Theatres Ltd — contribute the rest.

On that basis, the average private investment in a local film is $1.14 million, making a total of $119.7 million committed to the 105 productions with provisional certificates. And one of these productions is Now And Forever.

With the provisional certificate in hand, the Now And Forever Films Partnership comprising Lang Hancock, Barry McDonald, John Brookfield, C. R. Fieldhouse and “others” was formalised on December 1, 1981. Cheryl Ladd arrived in Sydney on January 17 and filming started the following day.

A week later, “Carnie” Fieldhouse walks on the set of Now And Forever in No 3 Court of the magnificent old Supreme Court building in St James Road, Sydney. He spent considerable time in the Sir Francis Greenway-designed court, built in 1819, during the early part of his legal career. But now he is acting on his new capacity of the film’s executive producer.

Mr Fieldhouse says he finds the film-making process slow, tedious and exacting. He queries the number of crew required but is convinced by his producers they are necessary.

He employs a full-time assistant on the set to protect his interests and those of his fellow investors by reporting back on developments and any problems that may arise.

The title of executive producer and “points,” or percentages, is another feature of the industry’s new era. Damien Stapleton, a director of the NSW Film Corporation who also controls the 13,000-strong Australian Theatrical and Amusement Employees’ Association (ATAEA), says such features have surfaced only in the past 12 months.

“At the moment we are able to make films cheaper than Hollywood because our pay rates for technicians and crew are about 50 per cent lower,” he says. “But you must understand that there aren’t many left who are being paid a scale rate of pay.

“While directors of a television soap opera may be earning the minimum of $300 a week, the likes of Bruce Beresford (director of Puberty Blues) are now commanding between $50,000 and $100,000 a film.

“Producers and directors also are now starting to talk about having points or percentages of a film’s returns as they do in Hollywood.

“And last year there was a stage where there was a new Australian film starting every Monday for 13 weeks and pay rates were negotiable.

“Producers’ rates went up 50 per cent and you even had some of them hovering behind tea trolleys on film sets trying to entice crew away to their film.”

The absence of big-name stars such as Marlon Brando and Clint Eastwood with their multi-million-dollar fees, inexpensive locations and a lack of “feather-bedding,” the term Stapleton uses to describe employing numerous consultants with vague titles, are other reasons he gives for our ability to make films cheaper here than abroad.

“But we’re getting there,” he says. “In 1976, when Eliza Fraser was the first Australian film to reach a budget of $1 million, everyone became a little scared. Now that figures wouldn’t turn a hair. And you have other Australian films such as The Year Of Living Dangerously and Captain Invincible with $5 million budgets — the average Hollywood budget these days is $12 millions.

“You might say that, on that basis, we’re half-way to Hollywood.”

*****
Craig McCarthy, “Why investors like films,”
Australian Business, March 4, 1982, pp. 44-45.

New tax incentives for investors in Australian films received the Royal Assent on June 24 last year and replaced existing provisions introduced in 1977. They were outlined in the Income Tax Assessment Amendment Act 1981 which contained a new Division 10BA, in Part III of the principal Act.

Entitled simply “Australian Films,” the division is split into Subdivisions A, B and C comprising sections 124ZAA to 124ZAP which define the criteria for investors to receive substantial tax deductions.

In broad terms, a deduction equal to 150 per cent of the money invested in a film’s production is available to an investor. The same investor is also entitled to receive, free of income tax, an amount equal to 50 per cent of the total investment which he or she made in the film’s production.

The fact that these deductions only become available from the time the film is producing income has created one of the legislation’s first teething problems. Australian Film Commission chairman Joe Skrzynski says that one of the findings in his recently-completed survey on the legislation’s first year is that there is a production “bottleneck” created by investors wanting their deductions in the year of their investment.

The pattern that has emerged is those investors are committing funds at the start of the financial year with a subsequent scramble for production crew and facilities in the months leading up to Christmas and into the new year. There is then pressure to complete the films in time to enable distribution deals to be signed before the end of the same financial year, enabling investors to make their deduction claims.

Deduction eligibility depends on certificates issued by Home Affairs Minister Ian Wilson, within whose portfolio the film industry falls. Provisional certificates are awarded to applicants who satisfy the minister their film meets the government’s definition of an Australian film and final certificates are awarded on the film’s satisfactory completion.

An Australian film is defined in the Act as one which is wholly or substantially made here or in an external territory and which has a significant Australian content. Other criteria for certification include the subject matter of the proposed film; its setting; the nationalities and places of residence of its authors, composers, actors, scriptwriters, editors, producers, directors and technicians; investment sources; and the nationalities and places of residence of investors.

Film accountant Penny Carl who has worked on such films as The Last Wave, Newsfront, Heatwave, Ginger Meggs and now Norman Loves Rose, says certain “grey” areas exist in the legislation relating to whether or not investment funds are “at risk.”

Under section 124ZAM of the Act, an investor who has contributed funds which are not at risk can only gain limited deductions, irrespective of whether or not the film is profitable. This could apply where distribution deals are completed in advance of a film’s production and the funds from those deals used as a basis for investors funding that film.

In fact some investors have contributed on that basis but it remains to be seen if the Taxation Department can prove it.

Miss Carl says funds used in a film’s marketing and publicity are also unlikely to be regarded as eligible for tax deductions. “We probably won’t know how the Taxation Department will deal with this until the first assessments are made but I think many investors will find only a certain percentage of their investment will earn the deductions,” she says.

Also clouding the issue is the recent revelation of another tax scheme (4/2, page 12) which, by using funds advanced from distributors, local film investors are earning leveraged tax deductions of 375 per cent. Though Treasurer John Howard says he intends writing to the company employing the scheme, United American and Australasian Film Productions Pty Ltd (UAA), company principal John Picton-Warlow, a Perth barrister, claims it has been functioning for two years.

Miss Carl says the leverage aspects of the UAA scheme makes a mockery of the tax legislation passed last June. “One of the ideas of the legislation was to eradicate tax leverage schemes through the ‘funds at risk’ clause,” she says.

Film investors such as Lang Hancock, John Brookfield, Barry McDonald and Carnegie Fieldhouse (see main story [above]) should be among those who will receive the first assessments under the June 1981 legislation during the next few months. Mad Max II and Puberty Blues are two films which should recoup their entire investment.

The tax advantages of investing in a local film depend on the amount of the investment, the income of the investor and the success of the film. The following examples of these tax advantages are based on the current tax rates of 32 per cent for incomes between $4,196 and $17,894, 46 per cent for companies and individuals earning more than $17,894 but less than $35,789 and 60 per cent for individuals earning more than $35,789:

If “John Smith” as an individual or “John Smith Pty Ltd” has a taxable income of $35,000, the normal tax would be $12,252. If “Smith” or his company invested $15,000 in an Australian film and that investment was assessed for the full tax deductions, the taxable income is reduced to $12,500 ($35,000 less $22,500) and the amount of tax which becomes payable is $4,000 — once the film is deriving income. This represents a tax saving to “Smith” or his company of $8,252 (the difference between $12,252 and $4,000).

If the film earned for “Smith” or his company $7,500 or less, this would be exempt from tax under the legislation and represents a further tax saving of up to $2,400. Thus, using the above example of a $15,000 investment in an Australian film which earns $7,500, the total tax saving is $15,500.

Assuming “Dr Brown” and commercial airline pilot “Smithers” have taxable incomes of $70,000, their normal tax would be $33,142. If they each invested $35,000 in an Australian film and that investment was assessed for the full tax deductions, their taxable income is reduced to $17,500 (70,000 less $52,500) and their tax to $5,600 once the film is deriving income.

This represents a tax saving to them of $27,542 (the difference between $33,142 and $5,600). If the film’s returns were enough to permit dividends being paid to its investors, “Dr Brown” and “Smithers” could each accept $17,500 without incurring tax. And this would represent a further tax saving of $5,600 and a total tax saving of $33,142.