Game Developers AU Tax Offset: Supporting Growth in Games

There are some good times ahead for game developers as the Australian Government’s recently announced tax-offsets for gaming development businesses in Australia are currently before the Senate. This will be the latest of a series of tax incentives for businesses that are designed to stimulate investment and growth in the digital technology sector, with sights set on ultimately contributing to job creation and the enhancement of talent in the game industry which is globally valued at $240 billion and is projected to reach $294 billion by 2024, according to Australia’s Department of Foreign Affairs and Trade Department.

Digital Games Tax Off-Set

As part of the Digital Economy Strategy, The Government has announced in the 2022 federal budget that a 30 percent refundable tax off-set will be available for game developers for eligible games (excluding those with a gambling element) that have been developed from 1 July 2022. The focus will be supporting investment and growth in the industry and reaping further long-term benefits in the wider digital technology space by enhancing the impact of the businesses and their talent. The proposed scheme will be implemented via the proposed Treasury Laws Amendment (2022 Measures No. 4) Bill 2022, which is currently before the Senate after a progress report from the Economic Legislative Committee was due on the 3 March 2023.

If passed, the projected outcomes of this scheme could range from increased export of games developed in Australia to more foreign investment in the Australian gaming industry. With the Australian market representing a small proportion of the international gaming market, the tax off-set may give game developers the opportunity to expand their operations and produce more games for the overseas market. In a global market with ever-growing competition, this scheme could give Australian developers the necessary edge to become industry leaders.

Even more importantly for the Australian digital technology sector, these potential tax off-sets make the Australian game development industry more attractive for international game development companies. The benefits of the potential new scheme give the international players confidence to choose the Australian gaming industry as their new home, particularly for game developers that produce AAA rated games (which are games produced by reputable mid-size and major publishers, often with a high profile and budget).

The long-term goal seems to be the overall growth of Australia’s digital future. The investments in the game industry would create more jobs and lead to a greater talent pool as we would likely see more and more highly qualified individuals enter the industry whilst also seeing more talent relocate to Australia for new opportunities. Nonetheless, these individuals will possess a range of skills that are transferable for use in other tech-based sectors. The emergence of talent with transferable skills could see this scheme to have indirect benefits for other areas including defence innovation, medical technology, education technology, emergency planning, construction, agtech, and modern manufacturing, all of which establishes the tax off-set as beneficial for the game development industry as well as the wider digital technology sector in Australia.

Who will benefit?

If passed, the federal tax off-set benefits will be available to game development businesses that spend at least $500,000 AUD on a project including Australian resident companies or foreign resident companies with a permanent establishment in Australia. The tax-offset will be capped at $20 million AUD per income year which will apply collectively to any connected and affiliated entities.

At this point, it is not clear what exactly the expenditure should be directed towards, however, the Government will be in consultation with the industry to determine appropriate qualifying expenditure.

State responses

Australia has been actively analyzing whether existing frameworks are sufficient to handle the gradual acceptance of digital currencies and crypto assets. One notable development is the introduction of a private member’s bill, the Digital Assets (Market Regulation) Bill 2022, which Liberal Senator Andrew Bragg has recently put before Parliament. The Bill aims to improve Australia’s regulation of cryptocurrency, by creating a new regulatory framework specific for digital currencies and crypto assets. While it may not pass through the current government expediently, it nevertheless provides an important first step forward in the ongoing debate about how best to regulate crypto assets in Australia.

Several states have welcomed the potential tax off-set benefits, and have implemented their own schemes to draw game developers to build games in their own states.

Queensland

The state of Queensland will implement the most generous tax off-set benefit by granting a 15 percent rebate as they expand their existing post-production, digital, visual effects (PDV) incentive to include digital game development. 

Queensland has pledged to support a larger scope of the game development community by lowering the cost barrier of production from $500,000 to $250,000. The lowered threshold will most certainly allow smaller developers to gain the benefits of the offsets as well as larger companies with the aim of helping smaller companies become more competitive in the market and experience faster growth. 

New South Wales, South Australia, Victoria

South Australia has been a front runner in providing tax-based incentives to game developers being the first state to provide such benefits with a 10 percent rebate designed to attract international investment for the state and increase jobs in the sector. Similarly, New South Wales and Victoria have jumped on the bandwagon in supporting the game development industry with its states with 10 percent tax off-sets. 

These state tax rebates will complement the federal 30 percent tax off-set scheme and certainly boost the potential of such states to harbour the growth of their own game development industries in a way that allows them to compete with global leaders in the industry. It has already been quite evident that these measures have been heavily welcomed by key figures in the Australian game development industry including Ron Curry, chief executive of the Interactive Games and Entertainment Association (IGEA). 

How Biztech Lawyers can help you

If you are involved in the game development industry and want to know how these potential new tax off-set schemes may impact your involvement in the industry from a legal standpoint, it may be time for you to talk to a technology lawyer to help you understand the legal side of things.

We are a global law firm with presence in the UK, US and Australia, who work closely with our clients to understand their unique business needs and provide tailored legal advice specific to their situation. Book in a free legal strategy session here.