July 13, 2023 By Pete Tuppurainen

Levelling Up: A Guide to Navigating the New Digital Games Tax Offset


Hello, Innovators!

Let's dive into an exciting opportunity brewing up in the digital games industry. As you may already know, this sector holds the crown as the most substantial creative sector worldwide and one of the fastest growing, no less. Globally, it commands a value around $250 billion. Back home, the Australian sector enjoyed a 22% growth between 2020 and 2021, raking in $226.5 million and offering over 1,300 fulltime jobs.

To further propel this upward trajectory, the Government has implemented the Digital Games Tax Offset. As of 1 July 2022, this offset equals 30% of a company's total qualifying Australian development expenditure, allowing claims up to $20 million per company (or group) annually.

Moreover, additional incentives are available in South Australia, Victoria, and New South Wales, and a gracious 15% support from Queensland's coffers. This aligns Australia competitively with the global standard of a 40% tax offset for the industry.

Eligible companies include both Australian tax residents and foreign tax residents with a permanent establishment in Australia. To secure the offset, a certificate issued by the Arts Minister is required, following the completion or ongoing development of a digital game. The specifics of your tax return's offset depends on the qualifying expenditure, as determined by the Minister.

To qualify, the Australian development expenditure should amount to at least $500,000, accounted over multiple years possibly.

What constitutes development expenditure, you ask? Essentially, it encompasses expenses incurred in relation to the game's development. Activities toward completing, porting, updating, improving or maintaining an eligible game are included. This extends to protocols like employee remuneration, engagement of independent contractors, prototyping, and investing in underlying game technology.

But remember, not all costs make the cut. Expenditures on non-game-development employees or activities, like administrative tasks, overseas contractors, business overheads, marketing, travel, and entertainment, are excluded.

Now, about eligible games. They are digital games with a classification and available to the public over the internet. Games developed for in-house purposes, containing gambling or gambling-like components, or used for advertising or commercial purposes, unfortunately, don't qualify.

Looking for some impressive Aussie reference? Consider Fruit Ninja that clocked over 1 billion downloads or Crossy Road with its 50 million downloads within 90 days of release. The Sims Freeplay and Melbourne's Big Ant Studios are also notables in the industry.

This offset is a solid opportunity to further invigorate Australia's gaming sector. Let's navigate these incentives together, and here's to building the future of the industry!

About Author

Pete Tuppurainen

Pete has a Bachelor of Commerce from University of New England and is a Chartered Accountant. He has over 20 years experience in Public Practice, specifically in Business Services; Virtual CFO, Advisory for SME’s, Audit, Business Valuations, Strategic Planning, IT Focused Solutions and Taxation. Outside of work, Pete is the founder & treasurer of Mount Isa Music Festival, the entertainment coordinator of the Mount Isa Rotary Rodea and resident bass player in local band “Bull Dust”.

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