Digital Games Tax Offset: Next level achieved

01 December 2022

What is the Digital Games Tax Offset (DGTO)?

The DGTO is a Federal Government initiative that will ‘provide eligible game developers with a 30% refundable tax offset for qualifying Australian games expenditure’ from 1 July 2022.

The DGTO is available for completion, ongoing development or porting of digital games, subject to prior certification by the Arts Minister and at least $500,000 of qualifying expenditure. Applicants must be companies that are either Australian tax residents or foreign tax residents with a permanent establishment in Australia.

Claims can be made for game completion or porting on a per project basis, in the year when the qualifying expenditure has ceased on a game; or annually for eligible ongoing development expenditure. Where a company takes over the development of a game from another company, the company is taken to have incurred the development expenditure of the previous company.

The offset is capped at $20 million per company (or group of companies who are consolidated or related) per income year. Reaching this cap would require approximately $66.7 million in eligible expenditure.

Qualifying Australian development expenditure will generally remain deductible for company income tax purposes ensuring the DGTO remains an additional benefit.

What games are eligible?

The DGTO applies to work on a ‘digital game’, defined as ‘a game in electronic form that can generate a display on a computer monitor, television screen, liquid crystal display or similar medium that allows for the playing of an interactive game’. The game must also be made available to the public over the internet for entertainment or education purposes.

The DGTO will not be available in relation to games:

  • that have gambling services or is substantially comprised of gambling or gambling-like practices. This goes beyond games considered to be gambling services under the Interactive Gambling Act 2001 (Cth) and may include certain loot box mechanics;
  • refused classification under the Classification (Publications, Films and Computer Games) Act 1995;
  • primarily developed for industrial, corporate or institutional purposes; or
  • primarily developed to advertise or promote a product, entity or service.


To claim the DGTO, the developer must first apply to the Arts Minister for one or more of the following certificates:

  • Completion certificate – for the development of a new game that is first released for sale during the income year;
  • Porting certificate – porting of a completed game onto a new platform; or
  • Ongoing development certificate – activities undertaken during the income year in relation to the ongoing development of one or more completed digital games.

Qualifying Expenditure

Qualifying Australian development expenditure (QADE) is certain expenditure incurred in respect to development of the game, as summarised in the table below:

Eligible ExpenditureIneligible Expenditure

Paying employees and contractors in the following roles:

  • project managers and artistic, creative and design directors;
  • game designers;
  • software developers and programmers;
  • engineers (including for audio, graphics, physics and software);
  • user experience designers and testers;
  • behaviour analysts;
  • quality assurance testers;
  • writers;
  • artists, animators and performers (for music, voice and motion capture); and
  • songwriters, composers, musicians and sound designers.

Research and prototyping.

Underlying game infrastructure (eg game engines and anti-cheating controls).

User testing, debugging and collecting user data for the game.

Updating the game or adapting the game for use on particular platforms.

Obtaining or maintaining a classification under the Classification (Publications, Films and Computer Games) Act 1995.

Expenditure on, or in connection with employees and contractors:

  • in roles that aren’t related to or directly attributable to development (eg administrative employees, social media managers, sales and marketing professionals, community managers, forum
    administrators and moderators); or
  • who were not Australian residents at the time the expenditure was incurred.

General business overheads including:

  • insurance, audit services, accounting services, human resources, recruitment services and legal services;
  • travel, accommodation, catering, entertaining or hospitality;
  • visas or work permits; and
  • financing of the game or company.

Use of land or premises, eg rent.

Purchasing or renting computer hardware or servers.

Acquiring or licensing existing software or other copyright material, trade marks, permission to use a person’s name, image or likeness, or endorsements.

Distribution, marketing, advertising, publicity or promotion for the game or company or otherwise acquiring users.

Activities that are only incidental to the development of the game (eg expenditure on external training, conferences, hiring equipment, release events and trade show demonstrations).

Any expenditure claimed or deducted for the purposes of another tax offset, including R&D tax offsets; or funded directly or indirectly by Commonwealth, State or Territory grants or subsidies.

Expenditure excluded by the integrity measures explained further below.

Integrity measures

The DGTO scheme includes integrity measures excluding certain payments to third parties. These measures may operate to limit claims for payments made to:

  • contractors who further subcontract the game development work to others (other than natural persons);
  • other parties where the transaction is not ‘at arm’s length’; and
  • an ‘associate’ of the company, such as a partner, trustee or beneficiary, or another entity that controls or influences the company.

The last two exclusions involve the application of the existing income tax legislation and are particularly complex.

However, there are also exceptions to those exclusions designed to accommodate legitimate arrangements that are common in the industry, ie remuneration of:

  • employees with minor shareholdings under employee share schemes or similar arrangements; and
  • ‘influential employees’ such as founders, for up to $65,000 per employee per year.

What does it mean for Australian and overseas businesses?

Introduction of the DGTO Bill into Parliament means the DGTO is almost certainly going ahead and provides the opportunity to consider the legislation in its final form – assuming no amendments are made.

While Australian resident companies will be able to access the DGTO, many Australian studios are currently smaller operations and may not meet the minimum $500,000 qualifying expenditure. Screen Australia and several State and Territory screen agencies have funding programs aimed at assisting development of games with lower budgets. The DGTO does not prevent a company from receiving State and Territory assistance, however it is the responsibility of the Applicant to determine if claiming the DGTO may affect State or Territory assistance eligibility.

Foreign resident companies will be able to take advantage of the DGTO provided they establish local offices in Australia.

The Australian Government has been actively promoting the Australian industry and the benefits of the DGTO for foreign businesses and investors, including through Austrade partnering with the Australian Interactive Games & Entertainment Associations in publishing Level Up: A Guide to the Australian Games Industry and securing official partner country status for Australia at Gamescom 2022 in Cologne.

State Governments have also been encouraging investment with local incentives and rebates, including the 15% Digital Games Rebate in Queensland and 10% rebates in New South Wales and South Australia.

HWL Ebsworth’s team of experts can advise game developers, publishers and investors on navigating the Digital Games Tax Offset as further information is publicly released, including in respect of:

  • taxation implications and structuring of Australian resident or foreign resident companies;
  • funding arrangements; and
  • intellectual property protection.

Our publication Games and Interactive Entertainment: The Australian Legal Environment can be accessed via or by emailing

Please contact us to find out more.

This article is not intended to be legal advice and should not be relied upon as such. The DGTO is a complex scheme and advice should be sought before making any decisions concerning expenditure or eligibility for the DGTO.

This article was written by Michael Boughey, Partner, Johnny Ho, Partner and Pierre Chao, Associate. 

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