Game developer

New Zealand fears brain drain of game developers to Australia

New Zealand game developers The association has expressed concerns that Kiwi talent will migrate across the Tasman Sea as the planned start date for Australia’s digital gaming tax offset passes.

New Zealand’s Minister for Digital Economy and Communications, David Clark, recently met with the NZGDA to discuss the level of competition posed by Australian incentives. NZGDA Chair Chelsea Rapp said the meeting was helpful and constructive.

Effective July 1, the Federal Government Tax Offset allows Australian and global game developers with a permanent local presence in Australia to claim 30% tax rebates on qualifying expenditure of at least $500,000. In the 2021-2022 budget, $18.8 million has been set aside for tax compensation.

Consultation on the tax compensation bill ended in April this year but was not tabled in parliament before the election. Ben Au, director of policy and government affairs at the Interactive Games and Entertainment Association (IGEA), said the legislation has bipartisan support.

The New Zealand Game Developers Association (NZGDA) says that taking into account the additional 10-15% tax reductions available in New South Wales, South Australia, Queensland and Victoria, a company could receive $400,000 in cash for every million dollars. eligible expenses.

Minister Clark told that there is a need for new programs supporting New Zealand’s video game sector to respond to Australia’s Digital Gaming Tax Offset (DGTO).

“In light of the Australian Government’s recently announced support packages for the gaming sector, shorter-term measures, including those aimed at providing a competitive environment, are now needed in New Zealand,” the minister said. Clark.

“Officials will work out what support would look like the most, keeping an eye out for Australian competition.”

Existing initiatives include a NZ$10 million investment in 2019 to establish the Digital Center of Excellence and the NZ$250 million Ārohia – Innovation Trail Blazer grant, which will begin in September by Callaghan Innovation, l New Zealand innovation agency.

Ms Rapp said New Zealand government policies were not enough to keep local businesses in the country. She also criticized existing tax incentives for research and development as not being fit for purpose because they exclude most activities in the gaming and interactive media sector.

“The existing 20% ​​grant for post-digital and visual effects, which is part of the New Zealand screen production grant, specifically excludes the games and interactive media sector,” Ms Rapp said.

“And we believe Callaghan Innovation’s new funding – the Arohia/Innovation Trailblazer grant and the new R&D grant – will not provide sufficient support to stop games and interactive media projects from moving across the Tasman.”

The NZGDA has called on the New Zealand government to allow game development studios to access the NZ Screen Production Grant, or something similar. It also calls for the creation of a 30% interactive digital media grant and an interactive industry development program to build on the Digital Center of Excellence.

In a July 1 statement, the NZGDA pointed out that several major game development studios have already expanded overseas or are currently considering moving to Australia.

At the time, Ms Rapp said “the reality is that [New Zealand] We’ll lose that talent and those businesses because we just can’t compete with the offer of a 40% discount to move to Australia.”

According to the NZGDA, there are more than 20 systems around the world offering tax reductions of 25-40%. Mr Au acknowledged that “the NZGDA’s advocacy with the New Zealand government is warranted”.

He also added that the IGEA has a close relationship with the NZGDA and that they share the goal of making the region “one of the best destinations for making games”.

“When the DGTO comes into place in Australia, and if the New Zealand government follows up on some of the recent messages about supporting its local sector, we can see that regional growth will happen over the next decade and that many exciting things will happen across our two territories,” Mr. Au said.

According to IGEA, the Australian digital games industry generated $226.5 million in revenue in fiscal year 2020-21. By comparison, New Zealand interactive media and video game studios generated $276 million in revenue in 2020-21, according to the NZGDA.

IGEA chief executive Ron Curry told in May 2021 that Australia’s tax refund “levels the playing field” against traditional game development powerhouses like Canada and France.

DGTO was announced ahead of Budget 2021 as part of the previous federal government’s 10-Year Digital Economy Plan. According to the bill, companies will require one of three certificates from the Minister of Arts to qualify for the 30% discount.

During the consultation, the IGEA made eight key recommendations and eight other recommendations. One recommendation highlighted by My Au is the removal of the requirement to release a game for a developer to claim compensation.

“It can create an almost perverse incentive to finish a game even if that studio doesn’t think it’s going to be successful. After a few years they kind of looked at the project with a hard eye and they think another path might be better, we think it makes sense that they can make a claim using the tax offset,” Mr. Au said.

In March, Screen Australia announced that it would make $6 million in grants available to small video game developers.

Do you know more? Contact James Riley by email.