Cth Treasury Draft Bill Proposing a Digital Games Tax Offset
Tuesday 5 April 2022 @ 10.24 a.m. | Taxation | Trade & Commerce
On 22 March 2022, the Commonwealth Treasury website released the Draft Treasury Laws Amendment (Measures for Consultation) Bill 2022: Digital games tax offset ('the draft Bill').
The Treasury is seeking feedback and views from stakeholders on the draft Bill and accompanying explanatory materials, which propose the creation of the new Digital Games Tax Offset ('DGTO'). As explained by the draft explanatory materials, the DGTO is:
"a 30 per cent refundable tax offset for eligible companies that spend a minimum of $500,000 on qualifying Australian development expenditure on eligible games."
Submissions on the draft Bill and the draft explanatory materials close on 18 April 2022.
Background
The draft Bill is part of the Digital Economy Strategy, and was announced on on 6 May 2021 by the Federal Government.
The DGTO proposes to:
- strengthen the Australian digital games industry;
- expand available employment opportunities for digital and creative talent;
- enhance the industry’s international competitiveness within the digital games industry; and
- make Australia a more attractive destination for foreign investment.
The draft explanatory materials explains that the DGTO:
"is designed to support and promote the growth of the Australian digital games industry through the concessional tax treatment for Australian game development expenditure."
The draft Bill proposes the introduction of a new Division 378 into the Income Tax Assessment Act 1997 (ITAA 1997), which would contain provisions regarding the DGTO.
Key features of the tax offset
The key features of the DGTO are outlined in the proposed subdivision 378-A of the ITAA 1997, which provides a guide to Division 378.
The draft explanatory materials summarises some of these key details regarding eligibility:
"The [DGTO] is available to an eligible company and is calculated with reference to the qualifying Australian development expenditure incurred by the company. A company is eligible for an offset when the following conditions are met:
- a certificate has been issued by the Arts Minister for the completion of a new game, the porting of a digital game to a new platform, or for ongoing development of one or more existing digital games during an income year; and
- the company claims the offset in its income tax return in respect of the income year...
In terms of company eligibility only entities that are companies for tax purposes are entitled to this DTGO. A company is entitled to the DTGO for an income year if:
- it is an Australian resident company, or an Australian permanent establishment of a non-resident company when it lodges the income tax return and when the tax offset is due to be credited; and
- the Arts Minister has issued to the company one or more certificates; and
- the company claims the offset in its income tax return for the income year."
Other key details of the DGTO include:
- the offset applies to a company's qualifying Australian development expenditure on digital games, which is determined by the Arts Minister;
- the DGTO is a refundable tax offset; and
- the offset is capped at at $20 million for any company per income year, and applies to the cumulative offset to which a group of related companies would be entitled to.
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Sources:
[Draft] Treasury Laws Amendment (Measures for Consultation) Bill 2022: Digital games tax offset and draft explanatory memorandum available from TimeBase's Lawone website
