A New Player in Town: Digital Games Tax Offset

The long-awaited Digital Games Tax Offset (DGTO) has been given the green light in the Senate recently. This landmark move, first introduced by the former Coalition government two years ago, provides video game studios with a 30% refund on development costs. Positioned as part of the Australian Government’s Digital Economy Strategy in the 2021-22 Federal Budget, the DGTO is set to spark a surge of innovation, creativity, and growth within the gaming landscape in Australia.

What is the DGTO?

The DGTO is a federal government initiative that offers a 30% refundable tax offset for qualifying Australian development expenditure. To be eligible and claim the offset, companies must incur a minimum of $500,000 on qualifying Australian development expenditure on or after 1 July 2022.

Who Can Benefit?

Setting the pace in the global gaming development industry, Australia is home to a thriving digital games ecosystem which supports more than 400 businesses. With a substantial technology talent pool, including over 200,000 software developers – 2,000 of whom are directly engaged in the gaming industry – the DGTO will serve as a critical platform for future growth, innovation, and foreign investment.

The incentive is aimed at Australian companies involved in the completion, ongoing development, or porting of digital games. While the offset is primarily targeted at Australian companies, foreign businesses can also benefit if they have a presence in Australia.

The Game Plan: Eligibility and Criteria

To qualify for the DGTO, companies must satisfy several conditions:

• They must either be Australian companies or foreign companies with a permanent establishment in Australia;
• They must have completed a digital game, ported a digital game, or carried on ongoing development of a digital game during the income year;
• They must incur at least $500,000 of qualifying Australian development expenditure; and
• They must have received one or more certificates from the Arts Minister in respect of the digital game.

Eligible and Ineligible Expenditures

The table below provides an overview of the types of expenses that either qualify or don’t qualify for the offset:

Understanding the Certification Process

Before claiming the DGTO, developers must apply to the Arts Minister for one or more certificates:

1. Completion certificate: This certificate is for the development of a new game that’s first released for sale during the income year.
2. Porting certificate: This certificate applies to the porting of a completed game onto a new platform.
3. Ongoing development certificate: This certificate is relevant for activities undertaken during the income year related to the ongoing development of one or more completed digital games.

The certification process ensures that only legitimate and relevant development activities benefit from the tax offset.

The Game Continues: What’s Next?

With Australians spending AU $4.21 billion on video games in 2022 alone, the growth of gaming as a form of entertainment is teeming with potential.

There’s a collective sense of anticipation around the impact of this legislation – a hope that it will be a game-changer, triggering an influx of international gaming studios that elevate Australia’s local talent and fuel the expansion of the gaming industry on our shores.

With the DGTO, it’s safe to say that the game has just begun!

Get in touch with our team to explore the DGTO, the R&D Tax Incentive or other government grants that may be available for game developers and innovative technology businesses alike.

Get in touch with our team to explore the DGTO, the R&D Tax Incentive or other government grants that may be available for game developers and innovative technology businesses alike.

The information contained in this blog is general in nature and should not be considered to be legal, tax, accounting, consulting or any other professional advice.  In all cases, you should consult with a professional advisor familiar with your factual situation for advice concerning specific matters before making any decisions.  By reading this blog, you confirm your understanding of this disclaimer.