Australia Is Introducing A Tax Rebate For Video Game Development [Update]

Australia Is Introducing A Tax Rebate For Video Game Development [Update]
Image: Untitled Goose Game

After years of lobbying from the local video game industry, the Federal Government will finally announce a refundable, nationwide tax offset for video game development in Australia.

Kotaku Australia understands that the full terms of the rebate will be announced on Tuesday 11 May, the night the Budget is formally handed down. But the government is planning to introduce a 30% digital games tax offset as part of new investment incentives, which includes packages to help small businesses build on their digital capacity.

Update 12:10 pm: A post on the Digital Economy website outlines some of the restrictions, with businesses having to spend “a minimum of $500,000” to qualify and that games with “gambling elements or that cannot obtain a classification rating” will not qualify:

The Government will introduce a 30 per cent refundable tax offset for eligible businesses that spend a minimum of $500,000 on qualifying Australian games expenditure. This tax offset will make Australia an attractive destination for digital talent. Consultation with industry in mid-2021 will inform the criteria and definition of qualifying expenditure to support the development of digital games. Games with gambling elements or that cannot obtain a classification rating will not be eligible.

Talent in the gaming sector has transferable digital capabilities that Australia could apply to a range of other sectors. These areas include the defence innovation, medical technology, education technology, emergency planning, construction (digital twins), agtech, and modern manufacturing. The Digital Games Tax Offset will be available from 1 July 2022 to Australian resident companies or foreign resident companies with a permanent establishment in Australia.

The tax incentive will be the first of its kind in Australia. Federal funding for video games has been provided in the past, but usually in the form of direct grants and funding, with offsets and production rebates typically only accessible to the film and TV industries.

“The Government’s new investment commitment today will do many things. It will spur the creation of brand new Australian game development studios, give existing Australian studios the support they need to take on ambitious new projects and accelerate their growth, plus attract further blockbuster AAA studios to Australia, all of which will create game development jobs in every state,” Ron Curry, CEO of the Interactive Games and Entertainment Association (IGEA) said.

Roger Clarke, the managing director of Koch Media which has published the Metro series, Maneater, Observer and more, said the rebate would support the expansion of small Australian studios, while also helping fuel growth from larger AAA publishers.

“It is clear from today’s decision that the Morrison Government has noticed how innovative and successful Australia’s game developers are, as evidenced by standout titles like Big Ant Studio’s AO Tennis 2 and SMG Studio’s Moving Out, to the amazing local independent studios like Mighty Kingdom and Hipster Whale who are exporting their games and services around the world, as well as the investment being poured into the Australian economy by international studios such as Sledgehammer Games, Gameloft, Wargaming, and Firemonkeys,” Clarke said.

Previous federal funding for video games has helped in the creation of many of Australia’s best games. The Australian Interactive Games Fund, which was established in 2013, provided grants and investment to studios like Defiant Development (Hand of Fate), Flat Earth Games (Objects In Space, TownCraft), Tin Man Games (The Warlock of Firetop Mountain), Loveshack (FRAMED), The Voxel Agents (The Gardens Between), Iron Helmet Games (Blight of the Immortals) and Uppercut Games (City of Brass).

The statement from IGEA noted that arrangements “for the implementation of the tax offset” are still to be ironed out, but that the policy as stands would be “one of the most significant to be implemented anywhere in the world”.

Tim Watts, Labor’s shadow assistant minister for communications and cyber security and a major advocate for video game development in Australia, welcomed the Government’s decision but warned “the devil will be in the details”.

This is a welcome backflip from the Morrison Government after seven years of neglecting the industry, but as always the devil will be in the details,” Watts said. “Labor has been advocating for some time that the Australian video game industry could be a billion dollar industry and a serious source of job creation in our post-pandemic recovery with the right support.”

Ron Curry, CEO of IGEA, added that the support for video games would help attract “vast inward investment” for an industry that was “unparalleled” in export potential.

“We congratulate the Prime Minister, Minister Hume, and the Minister for the Arts the Hon Paul Fletcher MP, for recognising not only that video games have an important place alongside TV and film in Australian screen production and storytelling, but also their unparalleled potential for supercharging Australia’s exports, attracting vast inward investment, and up-skilling a whole new generation of Australian digital workers,” IGEA’s Ron Curry added.

Update 10:25 am: Added comments from Labor MP Tim Watts.

Comments

  • Ok, so where’s the catch? This seems like sound, evidence-based policy with an outlook toward shoring up Australia’s future in a digital landscape.

    So, you know… antithetical to the entire LNP and everything it stands for.

    • I’d personally chalk it up to “oh my god there’s an election soon”, followed by panicked screaming.

    • The catch is the threshold still makes it very, very difficult for emerging businesses.
      That said, as far as catches go it’s acceptable as it means growth at the larger end which in turn should mean more employment opportunities.

      The best we can hope for is ongoing growth of the tax cut into better federal funding and recognition of an industry that has built itself up out of passion and perseverance, largely without that top level support that other industries enjoy.

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