Griffin on Tech: Game over for developers without tax breaks
A new 30% tax break for digital games developers takes effect today - across the Tasman.
It means that local and international development houses undertaking their development in Australia are suddenly much more competitive than their New Zealand counterparts. If you are a game developer in the states of Victoria and New South Wales you even get an additional 10% state tax break as well.
Victoria-based games developers can also take advantage of a research and development tax break of between 38.5 per cent to 43.5%.
Australia already has a major digital games industry, worth A$3.6 billion, with around 400 games producers ranging from one-person operations to the likes of Mighty Kingdom, which is listed on the ASX. Australia has made it very clear it sees games development as a priority area.
Cheaper offshore: Wellington-based PikPok has just expanded to Colombia
We subsidise filmmaking
Our own Government has stubbornly refused to offer any sort of tax concessions to the games development industry here. That’s despite taxpayers forking out around $200 million a year to subsidise the film industry and obliging Amazon with a sweet deal to film part of its Lord of the Rings prequel TV series here.
The argument for extending that type of support to games developers is a compelling one. While we have a strong roster of homegrown developers, including Rocketwerkz and PikPok, the industry needs the critical mass of the major games studios partnering with our industry to have their games developed here.
Our own developers need to be able to compete on price with other hotspots of game development around the world. Fostering game development talent leads to high-paying, high-tech jobs with crossover not only into filmmaking but augmented reality, artificial intelligence and several other related disciplines.
And the addressable market is vast, with digital games ranging from simple iPhone apps to sophisticated Playstation franchises expected to generate US$222 billion globally this year.
The New Zealand games industry, which generated $276 million last year, most of it in exports, and employed around 1,000 developers, therefore has a right to feel unloved at the moment.
“This is a crisis moment for our high-tech economic development aspirations,” New Zealand Game Developers Association chairperson Chelsea Rapp said yesterday.
Developers heading offshore
The Herald reports that several key games development shops are already moving offshore - with PikPok buying a 20-person games company in Colombia, a lower-cost destination for games development. Others are in the process of opening offices in Melbourne and other Australian cities where they can tap into the tax breaks.
If you are a young game developer looking at the better salaries on offer, the more generous employer superannuation contributions and the lower cost of living, why wouldn’t you head for greener pastures?
That’s the existential issue the games industry here now faces - an exodus of talent and Australia’s ambitious digital games industry luring work to its shores with a better proposition.
Match the 30% tax break
The New Zealand Game Developers Association has lobbied hard on the issue but failed to make inroads. Its request is reasonable - match the 30% federal tax rebate.
“We believe New Zealand can survive with a lower 30% rebate if it is complemented with an industry development scheme for training and startups. That will give us a strong foundation to compete long-term,” says Rapp.
With the government finalising its Digital ITP (Industry Transformation Plan), there’s an opportunity to think more strategically about the future of this subset of the tech industry. But the window is closing.
The next wave of blockbuster games dreamt up by Kiwi developers could end up being designed in Melbourne.
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