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Digital Games Tax Offset – Legislation Passed including Clarification of Interaction with R&D Tax Incentive

July 6th, 2023

In June 2023, Treasury Laws Amendment (2022 Measures No 4) Bill 2022 was passed to enact the digital games tax offset (DGTO).

The DGTO initiative was proposed by the former government as a refundable offset for Digital Games, to strengthen the digital games industry and develop local capability.

The Digital Games Tax offset only applies to a company that:

• carries out its business activities in Australia and has an ABN;
• is primarily responsible for the digital game development activities undertaken; and
• to which the Arts Minister has issued one or more certificates as a result is entitled to the offset for an income year, provided the company claims the offset in its income tax return.

Restrictions apply to deny eligibility for games related to a gambling service, games refused classification and other issues.

The DGTO provides a 30% refundable tax offset for eligible businesses that spend a minimum of $500,000 on qualifying Australian development expenditure related to the development of eligible games from 1 July 2022.

Noted within the draft is a list of Specific Exclusions, which has clarified that there is not a crossover with the R&D Tax Incentive:

Specific exclusions:

•  (3)  Despite subsections (1) and (2), the following expenditure of the company in relation to the digital game is not development expenditure on the game:
•  (l)  any expenditure claimed for the purposes of another tax offset, including for the purposes of section 355-100 (tax offsets for R&D);

Such exclusions were anticipated.

The DGTO may however allow companies to access a tax offset for expenditure that does not qualify under the R&D Tax Offset.

Please get in touch with our office if you would like to speak to someone about a potential  R&D claim, or check out our website for more information.