The Digital Games Tax Offset: Fueling Australia’s Gaming Industry Growth
While tax offsets might not typically spark widespread excitement, Australia’s Digital Games Tax Offset (DGTO) is proving to be far more than a mere financial rebate. This crucial initiative is a cornerstone for numerous local game development studios, fostering growth, creating employment opportunities for Australian talent, and even paving the way for the establishment of entirely new ventures.
Tax offsets, in their essence, are functional financial instruments designed to reduce the amount of tax payable on eligible taxable income. They are commonly implemented to support businesses that contribute positively to the broader community, often through sectors like tourism and culture. The DGTO, introduced in 2022, is slated for a review next year, and many Australian game developers are ardently hoping for its continuation and even expansion in the years ahead.
Understanding the Digital Games Tax Offset
What is the DGTO and its Purpose?
Australia’s DGTO was established in 2022 with the primary objective of alleviating the tax burden on local game development studios. This was a direct acknowledgment of the industry’s significant contributions to Australian culture and the arts.Eligibility and Benefits:
Any studio with eligible expenditure exceeding $500,000 can claim a refundable tax offset of 30%. This translates to direct cost savings that are then reinvested by the businesses into developing new, more ambitious projects.Industry Advocacy and Design:
According to the Interactive Games & Entertainment Association (IGEA), an industry advocacy body, the DGTO is the culmination of years of meticulous planning, iterative development, and persistent advocacy. Various stakeholders contributed to shaping its core objectives and expected impact.IGEA CEO Ron Curry highlighted the decade-long effort to secure a tax offset comparable to those available to other screen industry sectors, such as the Producer Offset, Location Offset, and PDV Offset (for post-production, digital, and visual effects). Curry explained the successful argument that video games represent high-value, intellectual property-driven, and “weightless” exports, generating skilled employment at the nexus of innovation, technology, and creativity. The framing of games as not just entertainment but also as a cultural medium, a creative industry, and a technology-enabled export sector was crucial.
Curry further noted that the DGTO is considered one of the most vital supports for medium-to-large local studios. He stated that many studios have been able to secure new projects, maintain or expand their workforce, and ultimately build their capacity thanks to the available funding. “We know that the DGTO has levelled the playing field,” Curry remarked. “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.”
With the DGTO due for a review of its effectiveness in 2027, Curry stressed the importance of a comprehensive understanding of its impact over the past few years. He believes it has provided “stability and confidence for many local studios” during challenging economic periods.
However, Curry acknowledges that the DGTO is not without its imperfections. He advocates for a restructuring to better accommodate studios of all sizes, particularly supporting the growth of “middle-tier” or medium-sized studios that may not have the same access to funds or rebates as their smaller or larger counterparts.
Local developers have also expressed that, in the long term, the DGTO could benefit from expansion to enhance awareness and to more adequately recognise diverse business activities, such as the shipping of complete games and projects developed with that specific intention. Currently, only released games are considered for qualifying expenditure. Despite these nuances, the DGTO remains an indispensable component of Australia’s local games ecosystem.
Gameloft Brisbane: A Story of Remarkable Growth
The introduction of the DGTO has been a catalyst for significant expansion at Gameloft’s Brisbane studio. The studio has more than doubled its workforce, growing from a single team of 55 employees to two teams comprising 120 individuals.
“We can actually measure the impact of the DGTO in the amount of head count in the company,” stated Manea Castet, Gameloft Studio Director. “More than that, it allowed us to transition from a mobile, work-for-hire developer to having 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 has not only fuelled Gameloft Brisbane’s internal growth but has also facilitated the on-shoring of numerous major game projects and associated development work. This makes Australia a far more attractive and lucrative location for global companies.
“We were able to grow a marketing department here at [Gameloft Brisbane],” Castet added. “It’s brand new. Up until [the DGTO], it was fully done internationally. Now, we have six full-time people working on marketing.”
Furthermore, the cost savings provided by the DGTO enabled Gameloft Brisbane to enhance its competitive expertise by hiring audio and quality assurance specialists within Australia, a deliberate shift from previously engaging talent in Montreal. “Even in the core disciplines – art, design – often it was a co-production,” Castet explained. “Now, we make sure it’s all done here [in Australia].”
In a period marked by significant economic downturn, which has led to widespread staff reductions, project cancellations, and even complete studio closures within the global gaming industry, the DGTO offers a vital source of stability, enabling sustainable game development and long-term growth.
“Right now, the whole industry of video games is shifting,” Castet observed. “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 greater global awareness of the DGTO and its benefits is necessary, but anticipates this recognition will grow as its impact becomes more widely understood. “It’s critical for the future,” he concluded. “This is why we’re still growing.”
Glinda Games: Built on the Foundation of the DGTO
Glinda Games, a comprehensive local studio that supports the development of numerous games, was specifically established to leverage the cost-saving advantages offered by the DGTO. The business model is centred around supporting Australian developers.
“We currently employ about 25 people, from industry veterans through to graduates and people in-between,” Daniel Visser, Managing Director of Glinda Games, shared. “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.”
Visser also highlighted how the DGTO has enabled the near-complete on-shoring of Glinda Games’ development operations. “It’s all Australian, and that’s because of the DGTO,” he stated. “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 financial savings generated by the DGTO directly benefit Glinda Games, while also providing advantages to both local and international clients, and the broader Australian games industry. Visser believes that companies utilising the DGTO have a responsibility to their staff and to contribute back to the local community, a principle he aims to embody at Glinda Games. “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,” he remarked.
The DGTO: Essential for Australia’s Mid-to-Large Game Studios
On the surface, the DGTO may appear to be a straightforward incentive. However, as Visser and Castet attest, its impact on their businesses has been exponential. The tax offset unlocks opportunities that would otherwise be unattainable, positioning Australia as a significant and competitive hub for game development while simultaneously creating valuable employment for skilled Australian developers.
“Undeniably, 100,000% it was the best thing to ever happen to the industry,” Visser asserted. “I would say it’s a great program.” He continued, “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 approaches its review, these success stories serve as compelling examples of the transformative power a seemingly simple tax rebate can have on local businesses and the broader industry.
