Digital Games Tax Offset
The digital games and interactive entertainment sector is booming globally, and Australia is no exception. With a market worth around $250 billion worldwide, the industry grew by 22% in Australia between 2020 and 2021, generating over $226 million in income and employing more than 1,300 full-time workers. To further support this thriving industry, the Australian government has introduced the Digital Games Tax Offset.
The offset allows eligible companies to claim a 30% tax offset on their qualifying Australian development expenses incurred from July 1, 2022. Companies can claim up to $20 million per year, making Australia more competitive globally. Some states also offer additional tax incentives on top of the federal offset. To be eligible, companies must be Australian tax residents or have a permanent establishment in Australia.
To claim the offset, companies need a certificate from the Arts Minister after completing a new digital game, porting a game to a new platform, or continuing development on existing games. This certificate determines the offset claimed in the company’s tax return. The minimum qualifying Australian development expenditure is $500,000 which can be accumulated over multiple years.
Qualifying expenditure includes expenses related to developing, completing, updating, and maintaining a digital game. It covers employee remuneration, independent contractors, prototyping, and underlying game technology. However, non-development employees, corporate costs, and expenses for marketing or business activities are not eligible.
Eligible games must be available to the public over the Internet and exclude gambling elements or commercial use. In-house games and those used for advertising purposes do not qualify. Loot boxes that involve selling virtual items for currency may also impact eligibility.
The Digital Games Tax Offset is designed to support the growth and competitiveness of Australia’s digital games industry. It provides incentives for companies to invest in game development, creating more jobs and fostering innovation within the sector. With this initiative, Australia aims to solidify its position as a leading player in the global digital games market.