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The recently legislated rebate allows eligible companies to offset 30 per cent of development costs against tax.
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Tax offset ‘to boost computer game industry’
25 July 2023
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Mid-tier accounting firm Bentleys NSW and digital consultancy G23 have jointly praised the government’s Digital Games Tax Offset initiative as a “game-changer” for an industry that employs 3,200 and generates more than $200 million in income a year.
Under the recently legislated DGTO program, eligible companies that develop digital games can claim a tax offset of up to 30 per cent of their qualifying Australian development expenditure (QADE).
Bentleys NSW managing director Kevin Cranfield said the DGTO operated as a rebate, allowing qualifying game developers to claim a significant portion of their production costs as an offset against their total tax liability.
To qualify, a company had to be primarily engaged in the development of digital games intended for commercial release and had incurred a minimum of $500,000 in QADE per completed project or income year (up to a maximum offset of $20 million a year).
“Qualifying expenditure includes costs associated with game design, programming, artwork, animation, audio production and testing,” he said.
“It also encompasses the wages paid to Australian employees directly engaged in game development activities, as well as the fees paid to Australian contractors or service providers involved in the project.”
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G23 managing partner David Yin said the tax offset scheme “recognises the potential value to the economy of the games development industry” and would help attract foreign investment.
“This is really exciting for the industry as it will accelerate investment and growth of both the traditional and emerging Web 3 digital games sectors in Australia,” he said.
“Additional government support in the form of the DGTO, on top of state government support, will help an industry sector which already has 405 Australian-based gaming companies, employs over 3,200 highly skilled people and generated income over $226 million in 2020–21.”
Mr Yin and Mr Cranfield said DGTO would be a game changer for the sector that would give a boost to local developers and encourage domestic and international players to enter the market.
“By offering financial support and reducing the financial risks associated with game development, the tax offset will allow companies to allocate more resources towards innovation, creativity, and quality,” Mr Yin said.
They said it would result in more jobs for developers, designers, animators, and writers and help the Australian gaming industry have a greater impact on the global stage.
The DGTO will be administered by the ATO and the Office for the Arts. The legislation received royal assent in June but applies to expenditure from 1 July 2022.
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