Tax offsets aren’t the most exciting financial tool to discuss but in Australia, the Digital Games Tax Offset is more than just a simple rebate. Rather, it underpins many local studios, supporting the growth and employment of Australian game developers, and even the creation of entirely new studios.
Tax offsets are purely functional. They reduce the amount of tax that’s payable on eligible taxable income, and they’re typically put in place to support businesses that contribute positively to society, such as through tourism and culture.
The DGTO was introduced in 2022 and will head to a review next year. Many Australian game developers are hopeful it will continue to make an impact, and even be expanded for the years to come.
Digital Games Tax Offset – quick links
What is the tax offset and why was it created?
Australia’s DGTO was introduced in 2022 as a means to reduce the tax burden on local Australian game development studios, in recognition of their contributions to culture and the arts.
All studios with expenditure of $500,000 or above are able to claim a 30% refundable tax offset, with cost-savings transferred back to the business, to reinvest in new and more ambitious projects.
According to the Interactive Games & Entertainment Association, a games industry advocacy body, the tax offset was the result of careful planning, iteration and advocacy over a number of years, with input from various parties shaping its primary goals and impact.
‘IGEA had been working for 10 years with the [Australian] Government to introduce a tax offset similar to those offered to other screen agencies,’ IGEA CEO Ron Curry tells ScreenHub, pointing to initiatives such as the Producer Offset, Location Offset and PDV Offset (for post, digital and visual effects).
‘[We] successfully argued that video games were high-value, IP-driven “weightless” exports that created skilled workers at the intersection of innovation, technology and creativity. It was important to frame games not just as an entertainment medium, but also as a cultural medium, a creative industry and a technology-enabled export sector.’
Anecdotally, the tax offset is one of the most essential supports for medium-to-large local studios, Curry says, with many ‘able to secure new projects, maintain or grow their staffing levels and ultimately build capacity because of the funding available.’
‘We know that the DGTO has levelled the playing field,’ Curry says. ‘Prior to its introduction, Australian developers faced a 20% to 40% cost disadvantage. By introducing it, the government signalled that Australia was open for business.’
Curry is particularly keen to highlight the clear impact of the DGTO over the last four years, as the rebate will be reviewed for its effectiveness in 2027. In this review, it’s essential the full picture of the DGTO’s effect is understood, he argues, as it’s provided ‘stability and confidence for many local studios’ through tough times.
Curry admits it’s not perfect. He believes the DGTO needs restructuring to suit organisations of all sizes, aiding the growth of ‘middle’ or medium-sized studios that don’t have access to the funds or rebates of smaller and larger studios.
Local developers told ScreenHub the tax offset could also do with expansion in the long term to ensure awareness, and to adequately recognise more kinds of business activity, such as shipping complete games and projects that are developed with this intention in mind. (Currently, only released games are considered as part of qualifying expenditure.)
Regardless of these quirks, the DGTO remains an essential part of the local Australian games ecosystem.
ScreenHub: Funding & development opportunities for video game developers
How the DGTO elevated Gameloft’s Brisbane studio
Gameloft Brisbane has experienced significant growth since the introduction of the rebate, going from around one team of 55 employees to two teams totalling 120 people.
‘We can actually measure the impact of the DGTO in the amount of head count in the company,’ says Gameloft Studio Director Manea Castet.
‘More than that, it allowed us to transition from a mobile, work-for-hire developer to have PC and console developers who create their own games here in Brisbane. It changed everything – the type of game we’re working on, motivation, the type of talent we acquire.’
The DGTO hasn’t only enabled the growth of Gameloft Brisbane. It’s also allowed the on-shoring of many major game projects and adjacent development work, as it’s now far more lucrative for global companies to work within Australia.
‘We were able to grow a marketing department here at [Gameloft Brisbane],’ Castet says. ‘It’s brand new. Up until [the DGTO], it was fully done internationally. New, we have six full-time people working on marketing.’
Gameloft Brisbane was also able to expand its competitive expertise with the cost savings brought by the DGTO, hiring audio and quality assurance experts within Australia – a deliberate move from working with people in Montreal.
‘Even in the core disciplines – art, design – often it was a co-production,’ Castet explains. ‘Now, we make sure it’s all done here [in Australia].’
During a time of significant economic downturn, which has seen countless global game studios reducing staff numbers, cancelling projects or being shut down entirely, the DGTO aids stability, allowing sustainable game development and growth in the long term.
‘Right now, the whole industry of video games is shifting,’ Castet says. ‘We see big companies struggling, small companies … really shining and generating a lot of revenue … Australia is really well positioned with the DGTO and other screen agencies.’
Castet believes there needs to be more awareness of the DGTO and its benefits in the global scene, but this recognition will come with time, as its impact is better understood.
‘It’s critical for the future,’ he says. ‘This is why we’re still growing.’
Glinda Games was created with the tax offset in mind
Glinda Games, a local full-service studio aiding development on many games, was created to take specific advantage of the cost-saving offered by the DGTO, with the business built around supporting Australian developers.
‘We currently employ about 25 people, from industry veterans through to graduates and people in-between,’ Glinda Games Managing Director Daniel Visser tells ScreenHub.
‘We’ve just won a [multimillion dollar] contract because of our pricing model and approach to pass on the DGTO, to make us more competitive, not only in the US, but also in Europe. So, we’ve kind of got the proof in the pudding.’
As Visser notes, the DGTO also aided the near-complete on-shoring of Glinda Games’ development.
‘It’s all Australian, and that’s because of the DGTO,’ Visser says. ‘We used to quite regularly outsource to India, China, Vietnam, for many, many years. [With the support offered] we almost exclusively hire and train locally [in Australia].’
The money saved goes back to Glinda Games directly, while also benefitting local and international clients, and the wider Australian games industry.
Visser believes companies that make use of the DGTO have a responsibility to serve their staff and give back to the local community, and he aims to position Glinda Games in that spot.
‘I think, as a long-serving taxpayer, I’m very aware that it’s taxpayer’s money, and that we owe it to Australia to give a return on that money,’ Visser says.
The DGTO is critical for Australia’s medium-to-large game studios
The DGTO, on the surface, remains a relatively simple offering – but as Visser and Castet assert, the impact it’s had on their businesses is exponential.
The tax offset opens up opportunities that wouldn’t otherwise exist, positioning Australia as an important, competitive country in which to develop games, while also providing employment for skilled Australian developers.
‘Undeniably, 100,000% it was the best thing to ever happen to the industry,’ Visser says. ‘I would say it’s a great program.’
‘This business wouldn’t exist without it, and I’m sure there [are] plenty of others that either wouldn’t exist, or wouldn’t be able to compete in what is a tough industry worldwide.’
As the DGTO heads to review, it’s these stories that shine brightest as examples of what a ‘simple’ tax rebate can do for local businesses.
