The Australian governmenthas announced, at the same time as handing down the annual budget, that it willreview the effectiveness of the various ways in which it supports films in Australia.

The review will encompass,among other things, the investment vehicle Film Finance Corporation Australia(FFC), development agency the Australian Film Commission (AFC), tax incentivesfor private investors, and the tax rebates used to attract studio films toshoot in Australia.

It is the focus on tax thathas most excited the local industry because it believes the only way to achievegrowth is through private finance. Yet the mechanism used for attractinginvestors - Division 10BA of the Income Tax Assessment Act 1936 - only deliversa 100% tax deduction on investments and is not seen as attractive enough.

"There is unanimity thatsomething has to be done and that the current system is not working," saidAustralian Screen Directors Association executive director Richard Harris. "Thewhole industry is desperate to find a solution and if the right model is foundthe whole industry would come in behind it."

FFC chief executive BrianRosen, speaking at a press conference to celebrate the five Australian featuresand three shorts in Cannes, said the only way the industry can reach criticalmass is to make 40 or 50 films a year.

"If you want to have greatfilms happening you have got to allow people to work in their craft and 16 or20 films per year do not allow you to do that," said Rosen who oversaw supportfor a record 16 films in the year to June 30.

In the previous year(2004-2005) a total of 22 films worth $82m (A$106m) went into production, notcounting very low-budget films. About 42% of the total budget came fromgovernment, 32% from private sources, 20% from foreign investors and the restfrom film industry partners.

Rosen says that the FFCsubordinates its investment in order to attract private Australian financiers.

Various options are beingexamined to attract more investors. These include providing tax relief on income- an option favoured by the Screen Producers Association of Australia - oradapting the tax rebate (the refundable tax offset) rules so they also suitdomestic producers.

A film gets back 12.5% ofwhat it spends in Australia under the rebate, providing it spends at least $11.6m(A$15). Because $11.6m is more than most Australian film budgets, there is talkof lowering this requirement and also of increasing the size of the refund forAustralian films.

The Federal Government willput $123m ($160m) into film agencies in 2006-2007. Most of it goes to the AFC,the FFC, the National Film and Sound Archive, the Australian Film, Television & Radio School and the television investors Film Australia and SBS Independent.