In the 12 months to June 30, production spending from foreign productions was just $17.6m (A$23m), compared with $168m (A$243m) for the previous year - which included shoots for Superman Returns and Charlotte's Web.Earnings for 2005-2006 were from three Asian films and World Wrestling Entertainment's The Condemned from the US.
The five-year average is six films spending $131m (A$172 m).
Chief executive of Ausfilm, Mark Woods, said the incentive in place since 2001 to attract foreign films to Australia -a tax rebate that refunds 12.5% of what is spent in Australia - worked best with "mega movies."
What the recent figures showed was that it was risky to specialise in just the biggest productions.
As part of the current review into Federal Government support for film, Ausfilm has put a case for making the incentive more attractive and flexible to prevent boom-bust cycles.
Foreign activity has improved since June 30 due to the arrival of Fool's Gold and Where The Wild Things Are.
Ausfilm wants to push the rebate for films spending at least $11.5m (A$15m) up from 12.5% to 15% and introduce a $3.8m (A$5m) minimum cap for movies that are just using Australia's post-production or visual effects services.
Such films are not included in the survey.
It also wants to drop the 70% rule, where at least 70% of the budget has to be spent in Australia for films under $38m (A$50m).
Instead it wants to reward producers of $38m (A$50m) films with what Woods calls a "frequent spender measure", which will allow them to bring smaller films into Australia and still get the benefits.
The survey is conducted by the Australian Film Commission.
Acting chair Chris Fitchett said the contraction in foreign feature activity has been "keenly felt" and highlighted "the importance of bolstering local production to provide the solid foundation required for a sustainable industry".
Overall, 32 films and 607 hours of television drama were made in the 12 months to June 30.
This was similar to the previous year, but the plunge in foreign films, meant the total value of all 2005/06 activity dropped sharply from $415 (A$542m) to £276m (A$361m).
There were 25 Australian films worth £75m (A$98m) made during the 12 months, which was three more than the previous year thanks to increased Federal Government funding.
Three co-productions worth $16m (A$22m), and four foreign films worth $27m (A$36m), were also included.
Arts Minister Rod Kemp said the results would be considered under the current review of government support of the film industry.