The Digital Games Tax Offset recently received Royal Asset and became law. This offset allows eligible Australian game developers to claim a 30% Tax Offset for qualifying expenditures from 1 July 2022.

The offset will be available for expenditure relating to the completion, ongoing development or porting of digital games. The offset amount is capped at $20 million per company per income year, regardless of the number of certificates applied for during the year. This cap also applies across closely affiliated companies and consolidated groups, and only the Company primarily responsible for the game's development is eligible for the offset.

Eligibility for offset

To be eligible for the offset, the business must meet the following conditions:

1. It must be an Australian resident company with an Australian business number (ABN) or a foreign resident company with a permanent establishment in Australia and an ABN.

2. At least $500,000 of qualifying expenditure; and

3. Have a certificate issued by the Arts Minister for the completion of a new game, the porting of a digital game to a new platform, or the ongoing development of one or more existing digital games during an income tax year;

4. The offset has been included in the Company’s income tax return for the year.

For the game to meet the eligibility requirements for the offset, it will need to meet the following criteria:

1. Be made available for use over the internet; or

2. Be primarily played through the internet; or

3. Operate only when a player is connected to the internet.

A game will not be considered an eligible game if it is:

1. A gambling service or substantially comprises gambling or gambling-like practices; or

2. A game that contains elements that are likely to lead to the game being refused classification under the Classification (Publications, Films and Computer Games) Act 1995; or

3. A game that is primarily developed for industrial, corporate or institutional purposes; or

4. A game that is primarily developed to advertise or promote a product, entity or service.

Qualifying Expenditure

The Arts Minister will determine the Company’s qualifying development expenditure amount. To determine the level of eligible expenditure, the Company must provide details of its development expenditure to the Arts Minister as part of the Certificate application.

The Minister will then provide the Company with a certificate specifying the amount of eligible expenditure for which the Company can claim the offset.

Types of Certificates

1. Completion Certificate – A company may apply for this certificate when:

a. The game is completed in that income year;

b. The Company has made an application for a completion certificate in relation to the eligible game in that income year;

c. The total of the company’s qualifying Australia expenditure incurred in completing the game is at least $500,000 (this can be incurred over multiple years); and

d. The Minister is satisfied that the eligibility conditions relating to the company applying for the certificate were met.

e. The game has been released for sale or otherwise made available to the general public.

2. Porting Certificate – This certificate relates to games that have already been completed but is being first made available on a new platform. This certificate may be applied for when:

a. The game is ported in that income year; and

b. The company has made an application for a porting certificate in that income year.

c. The total of the company’s qualifying Australia expenditure incurred in completing the game is at least $500,000 (this can be incurred over multiple years); and

d. The Minister is satisfied that the eligibility conditions relating to the company applying for the certificate were met.

3. Ongoing Development Certificate – This certificate applies where activities are being undertaken to update, expand or improve an existing game. A company can apply for this certificate when:

a. Ongoing development occurs in relation to eligible games in that income year.

b. The total of the company’s qualifying expenditure on the game's ongoing development is at least $500,000.

c. The Minister is satisfied that the eligibility conditions relating to the company applying for the certificate were met.

Unlike the Completion and Porting certificates, the Ongoing Development Certificate can be applied for multiple games in the same income tax year.

If you have any questions about this or wish to discuss it further, please contact us on 0434 084 635 or email amy@albaccounting.com.au.