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How A Tax Bill Could Kickstart The Aussie Games Industry

Yesterday it was reported that there was crossbench support for the R&D Tax reform – a reform that may end up kickstarting the declining games industry in this country. How? Why? We spoke to Antony Reed, Chief Executive of the Game Developers’ Association of Australia about the impact.

It’s all about the R&D Tax Credit – a proposed tax credit designed to help Australians invest in companies focused on research and development. It replaces the R&D Tax Concession – a flawed piece of legislation exploited by large firms – and attempts to steer the financial support back into the hands of small to medium enterprises.

Basically it’s a 45 per cent refundable tax offset (equivalent to a 150 per cent concession) for eligible entities with a turnover of less than $20 million per annum.

In layman’s terms – it’s an attempt to drive investment dollars into R&D, and videogames fall into that department – in a very big way.

“The one thing that held the Australian industry back over the years,” claims Antony Reed, “is because we’ve not had local investment. Money makes good games. The more money you have the better the game you make, and Australia has never had a large amount of local investment. So the R & D goes a step toward helping secure investment in the industry.”

Antony Reed is the Chief Executive of the Games Developers’ Association of Australia (GDAA) and played a very big part in helping the government tweak legislation to best serve not just video games, but the growth of Australia’s knowledge economy as a whole.

“It could actually potentially have a really large effect,” claims Antony. “To be clear this is not specific to the game’s industry, it can be used by anyone in the innovation space. We had a lot to do with advising on the legislation, but this is something that was designed to help small and medium enterprises (SMEs) as a whole.

“With the R and D credit, what the government want to do was eliminate all the big heavy industries, so that the SMEs could benefit. They wanted to focus on the knowledge economy – they don’t want to turn Australia into the world’s quarry!”

So the tax credit helps Australia grow its knowledge economy in general – and it’s far from exclusive to the Australian video games industry – but given the nature of games development, this is a piece of legislation that almost seems tailor made for gaming.

Essentially, the vast majority of development on any video game falls under the catch term ‘research and development’.

“In terms of our development community,” begins Antony, “it’s perfect for the games industry. If you’re writing code, or working out mechanics, working on new animation systems, that all qualifies under the system.”

In addition, studios who want to focus on contract work – even if the IP is held overseas – still qualify. As long as they’re involved in research and development.

“There’s also a section called supporting R & D,” says Antony, “so all the testing involved qualifies. What that means is if companies want to look for contract work, they can actually claim against the contract work that they’re doing. It could bring the cost of Australian development down quite substantially.

“In the current legislation the IP can be held off shore,” he continues. “You can be working under the contractor model, and you can be working on existing middleware technology. The R & D would refer to the work you do on that middle ware to suit your own purposes.”

Obviously, this is good news for an industry which has seen its share of ups and downs over the past few years – but it’s particularly positive for those currently studying in the large number of Game Design courses dotted throughout Australia. Speaking to many of those involved in higher education, and those that work in the industry, a major concern has been the huge number of graduates heading into an industry that can’t support them – locally at least.

According to Antony Reed, this new legislation could help restore the balance.

“The reality is, without all those components working together in tandem, the industry can’t grow,” he said.

“Without an education sector that can provide talent, without an industry and without financial support – you know, that golden triangle – without those three working harmoniously, we don’t have an industry. And that’s what this legislation does – it adds to the financial side of things.

“We’re trying to build that golden triangle, to encourage investment in the local industry so it can now grow, and we have an education sector that can support this growth.”

Now, for Antony Reed, it’s time to put the foot on the pedal, and help increase the visibility of video games as a growth industry in this country. According to him, any investment in video games will ultimately pay dividends.

“There’s a few things I need to do,” he begins. “One is to provide a great deal more education on the government side. They understand what it is we do to some extent – they get that games are important, but they probably don’t get how prolific games are. And they definitely don’t get how important games can be to the economy.

“That’s the next step for us – an advisory campaign to the government to say this is what we do and this is why it’s important for you to support us – because from a broader perspective this is Australia’s knowledge economy. If you’re not digging a great big hole in the ground – this is where your money is going to come from!”

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