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The Australian Federal Government has introduced the Digital Games Tax Offset (DGTO), providing a 30% refundable tax offset for eligible expenses in Australian game development starting from 1 July 2022. This offset, which covers various phases of game production, sets a spending threshold of $500,000 and is applicable to both domestic and foreign companies with a permanent base in Australia. Eligibility requires approval from the Arts Minister and specific certification.
The article further outlines the games that qualify, the process for claiming the offset, the implications of certificate revocation, and essential legislative references.
What is the digital games tax offset (DGTO)?
The Digital Games Tax Offset (DGTO) , introduced by the Federal Government, offers a 30% refundable tax offset on qualifying expenses related to Australian game development starting from 1 July 2022.
This offset covers the completion, ongoing production, or adaptation of digital games. However, it requires prior approval from the Arts Minister and a minimum spend of $500,000 on qualifying costs. Only companies classified as Australian tax residents or foreign tax residents with a permanent base in Australia can apply.
For game finalization or adaptation, claims can be filed on a project-to-project basis in the year when the relevant expenses end. For ongoing development costs, claims can be submitted annually. If a company assumes the development of a game from another firm, the expenses from the previous company are attributed to the new developer.
Each company (or related group of companies) has an offset limit of $20 million per fiscal year. To hit this limit, a company would need to spend roughly $66.7 million on qualifying activities.
It's noteworthy that the standard deduction for qualifying Australian game development expenses remains, making the DGTO an extra advantage for companies.
What games are eligible?
The DGTO pertains to "digital games," which are defined as electronic games capable of producing visuals on devices like computer screens, TVs, LCDs, or other similar mediums that facilitate interactive gameplay. Moreover, these games should be accessible to the public online, either for entertainment or educational objectives.
To be eligible to claim the DGTO in an income year you must:
be an Australian resident company with an Australian business number (ABN), or a foreign resident company that has a permanent establishment in Australia with an ABN
obtain one or more certificates from the Minister for the Arts stating your eligibility for the DGTO and total QADE for the income year
claim the offset in your company tax return for the income year.
Certificates
To claim the DGTO, a company (or the head company of a consolidated group) may apply for a certificate from the Minister for the Arts for a:
completion certificate – for development of a new game
porting certificate – for a game ported to a new platform
ongoing development certificate – for ongoing development of an existing game.
To apply for the certificate and to find out more about the eligibility criteria, go to the Office for the Arts website. Once you’ve obtained a certificate from the Minister for the Arts, you can claim the DGTO in your 2022–23 company tax return on the calculation statement at label E - Refundable tax offsets.
What to do if your certificate is revoked
Certificates issued by the Minister for the Arts can be revoked.
If this happens you will need to repay any amount of DGTO your company has received regarding that certificate.
Situations where the Minister for the Arts can revoke the certificate include:
where the issue of the certificate was based on inaccurate information
fraud or serious misrepresentation
where the total of the company's QADE on the game is less than $500,000 in the relevant income year.
A decision made by the Minister for the Arts to revoke a certificate previously issued, or a decision to refuse an application for a certificate, are reviewable in the Administrative Appeals Tribunal (AAT).
Resources
Legislative Materials
If you would like assistance identifying whether you qualify for the offset or like to apply for a certificate, please do not hesitate to reach out to our Business & Tax Team.
