How A Tax Bill Could Kickstart The Aussie Games Industry

How A Tax Bill Could Kickstart The Aussie Games Industry
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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!”


  • This is good news, and nice to see that they’re aiming it at small to medium firms of under $20 million turnover.

    It looks like (from what I just read online) that the old scheme was far too expensive for the Federal government because huge companies were claiming R&D tax concessions for incredibly minor segments of totally unrelated projects (‘researching’ a mine location, for instance).

    Hopefully this can kickstart a boom in the local industry, or at least help out some of the struggling companies.

    • Yeah, except that isn’t true. Larger companies often pay less tax than companies making a fraction of the profit. The tax breaks that major companies get, along with extremely creative accounting mean that those who are sucking the most money out of the economy often put the least back in.

      Demonising taxation is one of the worst legacies of the last 50 years of politics and the sooner people understand that we need it in order to fund the proper working of the government, the better.

    • It’s also nice that Kotaku’s Award-Winning Journalist™ does investigative journalism/interviews and the site isn’t just press releases 🙂

      • Thanks man – the news came out yesterday, but I didn’t want to just regurgitate the press release without going into detail about what it meant! Glad you noticed!

  • The Credit doubles the basic rate of support for SMEs compared to that available under the current R&D Tax Concession.
    However, the support is available against a narrower definition of R&D and with significant new restrictions on eligible expenditure.
    Overall, the support for games development may be reduced.
    As an aside, the characterisation of large company claims as inappropriate has been a result of a Government campaign based on assertion and a refusal to provide hard evidence to support its description.

    • A narrower definition of R&D to mitigate excessive claims is surely a good thing, though? Plus, like the article said, coding and animation would be covered under the new design.

      To quote from a paper by Nicholas Gruen in April this year: “Mining claims have expanded substantially faster than the expansion in mining investment. Indeed, in 2008-9 claims for R&D in mining exceeded the claims made in manufacturing for the first time. Further, Australian miners claim a dramatically higher share of R&D in their mining investment than their counterparts do in comparable countries like Canada.”

      Is there evidence suggesting whole-of-production claims were warranted?

  • Does this mean we’ll end up with more companies like Krome… rolling from one contract job to the next?

  • Love your work Mark, and more so Anthony!

    Anything which helps stabilise the countries companies is a fantastic thing.

    All we see is a rising dollar and it adds so much uncertainty to an industry chocked full of uncertainty, its really nice to see something which might help stabilise things.

  • Yay. Now Australia can produce local games cheaply and charge other regions twice as much. Suck it, rest of the world!!
    Not likely I know, but I dream of a better world…

  • thats really great for me, as i’m trying to get into the games industry, so maybe i won’t have to leave australia? 😀

  • I thought this had passed already?

    I kinda dont get how it works though. does it mean ALL development costs (code and art etc) qualifies, or just the tech for tools?

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