Short answer: An Australian games studio generally cannot claim both the Digital Games Tax Offset (DGTO) and the R&D Tax Incentive (R&DTI) on the same dollar of spend. You choose. The DGTO gives a flat 30% refundable offset on all qualifying Australian game development expenditure (minimum $500,000 per game). The R&DTI can be worth more for a small company — a refundable offset of up to 43.5% — but only on activities that involve genuine technical experimentation. Which one leaves you better off depends on how much you spend, your turnover, and how much of your work is true R&D rather than general production.
The two incentives at a glance
Both are refundable offsets, which means a company in a tax-loss position can receive the benefit as a cash refund rather than waiting to use it against future profits. That matters for studios that are pre-revenue or reinvesting everything into the next title. Beyond that, they work very differently.
| Digital Games Tax Offset (DGTO) | R&D Tax Incentive (R&DTI) | |
|---|---|---|
| Rate | 30% of qualifying Australian development expenditure (QADE) | Your company tax rate + 18.5 percentage-point premium — 43.5% refundable for most small studios on the 25% rate |
| What it covers | Broad game development: design, art, programming, production, testing, and ongoing live-ops work | Only eligible R&D activities — work with a genuine technical unknown resolved through systematic experimentation |
| Minimum spend | $500,000 QADE per game | $20,000 notional R&D expenditure |
| Cap | $20 million benefit per company (or group) per income year | $150 million R&D expenditure threshold |
| Who it suits | Studios developing eligible digital games (not gambling) | Any company doing eligible R&D — games, engine tech, tools, or non-game software |
| Turnover | No turnover limit (benefit capped at $20m) | Refundable 43.5% rate applies under $20m aggregated turnover; above that it is non-refundable and tiered |
| Administration | Certificate from the Office for the Arts, then claimed through the ATO | Register activities with AusIndustry within 10 months of year-end, then claim through the ATO |
| Available since | 1 July 2022 | Current refundable settings since 1 July 2021 |
Current settings, reform on the horizon. The R&D Tax Incentive figures here reflect the law as it stands for the 2025–26 income year. In the 2026–27 Federal Budget (announced 12 May 2026) the Government proposed significant R&DTI changes — a higher offset for core experimental work, removing eligibility for “supporting” activities, lifting the turnover threshold for the refundable offset to $50 million, and raising the minimum spend to $50,000. These changes are not yet law and are proposed to start from 1 July 2028. Studios planning multi-year programs should factor them in. The Digital Games Tax Offset is unchanged.
The rule that forces the decision: no double-dipping
This is the part studios miss. Expenditure claimed under the DGTO cannot also be claimed under the R&DTI, and vice versa. The two offsets are mutually exclusive on the same costs. There is a further sting: any expenditure you claim under the DGTO is also excluded from the R&D intensity calculation, even if you do not claim it under the R&DTI at all. So the choice is not just “which scheme”, it is “which scheme for which slice of the budget”, and getting that line wrong can quietly cost you the higher-value claim.
When the DGTO is the better choice
- Most of your spend is development, not experimentation. A polished game involves enormous effort — art, level design, narrative, production — that is skilled work but is not technically novel. The DGTO does not care whether the work resolved a technical unknown. It rewards the whole QADE base at 30%, where the R&DTI would only reward the genuinely experimental subset.
- Your annual game spend comfortably clears $500,000. Above that threshold, the breadth of the DGTO base usually outweighs the R&DTI’s higher headline rate.
- You want fewer eligibility arguments. The DGTO turns on a defined certificate and Australian spend on an eligible game. The R&DTI turns on whether each activity meets the “core” or “supporting” R&D tests — a more documentation-heavy, more contestable assessment.
When the R&DTI is the better choice
- You are a small company and the rate gap matters. For a studio under $20 million turnover, 43.5% versus 30% is a meaningful difference on every eligible dollar.
- You spend under $500,000. Below that, the DGTO is simply not available, so the R&DTI is the only door open.
- Your work is genuinely technical. New rendering or netcode approaches, procedural generation systems, novel multiplayer architecture, performance breakthroughs on constrained hardware — the kind of work where the outcome was not knowable in advance — is exactly what the R&DTI is designed for.
- You build more than games. Engine technology, developer tooling, or non-game software products fall outside the DGTO entirely but can sit squarely inside the R&DTI.
Can you use both? Sometimes — but never on the same dollars
In principle, a studio could claim the DGTO on the broad QADE of a game and the R&DTI on a separately identifiable, genuinely experimental sub-project that it carves out and does not include in the DGTO claim. In practice this is delicate. The activities and the expenditure have to be cleanly separated, the records have to support that separation, and you have to remember that anything sitting in the DGTO claim is locked out of the R&D intensity test. This is structuring work, and it is the single most valuable conversation to have before the income year closes, not after.
What trips studios up
- Leaving the decision until tax time. The DGTO needs a certificate from the Office for the Arts and the R&DTI needs activities registered with AusIndustry within 10 months of year-end. Both reward planning during the year, not reconstruction afterwards.
- Treating all development as R&D. Claiming routine production work as experimental is the fastest way to attract ATO and AusIndustry attention. The line between skilled development and eligible R&D is real, and it needs honest, contemporaneous records.
- Forgetting the intensity exclusion. Putting expenditure through the DGTO without modelling its effect on the R&D intensity calculation can shrink an R&DTI claim the studio did not realise it was giving up.
- Assuming the higher rate always wins. 43.5% on a narrow experimental base can be worth less than 30% on a wide development base. The right answer is an arithmetic one, run on your actual numbers.
How we help
Count Out Loud works across the Australian screen and creative industries, including the games and interactive sector. We model both paths on your real expenditure, identify which slice of work is genuinely R&D versus general development, flag the structuring decisions that have to be made before year-end, and coordinate the specialist R&D claim work where the R&DTI is the better route. The goal is simple: the largest defensible benefit, with records that hold up.
Frequently asked questions
Can a games studio claim both the Digital Games Tax Offset and the R&D Tax Incentive?
Not on the same expenditure. The two offsets are mutually exclusive on the same costs, so a studio must choose which scheme applies to each dollar of spend. Expenditure claimed under the DGTO is also excluded from the R&D intensity test, even if it is not claimed under the R&DTI.
How much is the Digital Games Tax Offset worth?
The DGTO is a 30% refundable offset on qualifying Australian development expenditure, available where a game incurs at least $500,000 of that expenditure, capped at a $20 million benefit per company or group per income year. It has applied since 1 July 2022.
How much is the R&D Tax Incentive worth for a small games studio?
For a company with aggregated turnover under $20 million, the R&DTI is a refundable offset equal to your company tax rate plus an 18.5 percentage-point premium — 43.5% for most small studios on the 25% company tax rate. It only applies to eligible R&D activities, not to all development work.
Which one should my studio choose?
It depends on three things: how much you spend (the DGTO needs $500,000 per game), your turnover (the 43.5% R&DTI rate applies under $20 million), and how much of your work is genuine technical experimentation rather than general production. A wide development budget often favours the DGTO; a smaller, tech-heavy program often favours the R&DTI. The right answer is an arithmetic comparison on your actual numbers.
Does the R&D Tax Incentive apply to game art and design?
Generally no. Art, level design, narrative and similar creative production are skilled work but are not technically experimental, so they sit outside the R&DTI. They can, however, form part of a DGTO claim, which is one reason the DGTO suits broad development budgets.
When do we need to decide?
Before the income year closes wherever possible. The DGTO requires a certificate from the Office for the Arts, and the R&DTI requires activities to be registered with AusIndustry within 10 months of the end of your income year. Both reward planning during the year and clean, contemporaneous records.