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NZ Media Reports that Australian Tax Incentive a Threat to NZ Video Game Development Industry

A recent article on www.stuff.co.nz has highlighted that Australia’s R&D Tax Incentive and Digital Games Tax Offset has the NZ video game development industry worried

The article highlights that:

• Australia’s proposed Digital Games Tax Offset (DGTO), an initiative of the former coalition federal government which has not yet passed as law, is a threat to New Zealand’s gaming industry accounting to their Game Developers Association:
  • The proposed incentive offers a 30% refundable tax offset for eligible businesses that spend a minimum of $500,000 on qualifying Australian expenditure related to the development of eligible games.
  • Additionally, state-based programs in South Australia, Victoria, New South Wales and Queensland are offering additional benefits;
• New Zealand is at risk of losing video game development companies to Australia as studios look to take advantage of a new tax incentive;
• A New Zealand interactive games survey from December found that more than half of New Zealand’s top 12 studios were considering moving to Australia

As a separate incentive, companies undertaking development activity in Australia may qualify for the R&D Tax Incentive where their activities meet the relevant criteria.

In May 2022, the Australian treasury published the Exposure Draft Explanatory Materials on the DGTO, which has clarified that there is not a crossover with the R&D Tax Incentive; expenditure claimed under the R&D tax incentive cannot be claimed under the DGTO, and vice versa.

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

The status of the DGTO (as to when or if it will be passed as law) is not yet clear given that it was not passed as law before the old federal parliament was dissolved.