“Momentous occasion”: New 30% tax break for video game developers passes in the Senate

A long-awaited tax break providing video game studios a 30% refund on development costs has passed in the Senate, marking what Australian industry leaders have described as a major win for local talent.

Legislation underpinning the Digital Games Tax Offset (DGTO) was passed in the Senate on Wednesday morning, two years after the plan was first introduced by the former Coalition government. 

It was voted through as part of the Treasury Laws Amendment (2022 Measures No. 4) Bill 2022, which will now return to the House of Representatives for final legislative approval.

At its core, the DGTO will allow video game studios to claim nearly a third of their development costs as a tax offset, provided they have undertaken $500,000 of qualifying expenditure.

The offset will retroactively cover expenditures dating back to July 1, 2022.

The Interactive Games and Entertainment Association (IGEA), the peak industry body for video game organisations, says Australia will soon have one of the world’s most generous tax landscapes for video game developers.

“Today is a momentous occasion for Australian games creators, who have an extraordinary reputation internationally,” IGEA CEO Ron Curry said Wednesday.

“These developers can now confidently proceed, expand and scale their businesses to deliver in-demand game content to a global audience and are well positioned to drive the knowledge economy.”

Beyond local developers, IGEA expects the tax offset will encourage international gaming titans to establish or grow their presence in Australia.

“With the help of the DGTO… we’re going to see many more studios created both organically and through significant foreign investment,” Ben Au, director of policy & government affairs at IGEA, told SmartCompany last year.

Political games in the Senate

The measure enjoyed bipartisan support, with both government and Coalition senators expressing their support for the local industry — and video games themselves.

Video gaming is “a long-forgotten industry that’s worth billions and billions of dollars,” said National Party Senator Ross Cadell during Tuesday night’s debate.

“It is as big as the film industry, and having an Australian presence in it is important.

“I note that the industry was waiting on this bill coming through; there are tax benefits kicking off for them on 1 July and it will give them the certainty to go out and start hiring.

“Importantly, they can get these projects on the books in Australia.”

Cadell’s appreciation for Sydney’s Chaos Theory Games and its upcoming title Crab God: Mother of the Tide served as a welcome reprieve from the heated debate over other measures in the omnibus bill.

Greens Senator Janet Rice called for the offset not to be applicable to video games using ‘loot boxes’, randomised in-game items that critics have likened to gambling.

While that amendment failed in the Senate, the Greens ultimately threw their support behind the bill.