Supporting the growth of the digital games development industry in Australia
The Government is introducing the Digital Games Tax Offset to promote the growth of the digital games development industry in Australia, which will provide a 30% refundable tax offset for qualifying Australian games expenditure from 1 July 2022. To be eligible, the game must not have gambling elements and at least AUD 500,000 qualifying expenditure must be spent on the game. The definition of qualifying Australian games expenditure will be informed through further consultation with industry stakeholders. The Digital Games Tax Offset will be available in the year when the spending of qualifying expenditure has ceased on a game and the maximum tax offset a developer can claim in each year is AUD 20 million.
Further details of the eligibility criteria and the definition of qualifying Australian games expenditure will be informed through stakeholder consultation.
Supporting the Consumer Data Right rollout in the banking, energy and telecommunications sectors
Additional funding of AUD 111.3 million over two years from 2021-22 (including AUD 35.0 million in capital funding) has been allocated to continue implementation of the Consumer Data Right in the banking sector and to accelerate its rollout to other parts of the economy, including the energy and telecommunications sectors. This is important to provide greater choice and control for Australians over how their data is used and disclosed, providing options to share data between service providers of their choice to encourage innovation and competition.
Patent box regime announced for medical and biotech technologies
Australia is introducing a patent box regime as a way of encouraging investment in Australian medical and biotech technologies. The start date is slated to be 1 July 2022. The patent box will tax income derived from Australian medical and biotech patents at a 17% effective concessional corporate tax rate. This is an attractive reduction given the normal corporate income tax rate is 30% (or 25% for small and medium companies from July 2021). Notably, only granted patents applied for after the Budget announcement will be eligible. We expect this new regime would be welcomed by industry and potentially used for more research and development to be undertaken in Australia. There will also be a consultation with industry on whether the patent box regime should be extended to the clean energy sector.
Self-assessing the tax effective life of certain intangible assets
The Government plans on amending tax legislation to allow taxpayers to self-assess the tax effective lives of eligible intangible depreciating assets, such as patents, registered designs, copyrights, in-house software and telecommunications site access rights. This measure will apply to assets acquired from 1 July 2023 (after the temporary full expensing regime, which was extended until 30 June 2023 in this year's budget, has concluded).
Currently, the tax effective lives of such intangible assets are set by statute. Allowing taxpayers to self-assess will align the tax treatment of these assets with that of most tangible assets. Practically, if a taxpayer self-assesses an asset as having a shorter effective life than the current statutory life, deductions are effectively brought forward.
The Government has indicated that taxpayers will continue to have the option of applying the existing statutory effective life to depreciate these assets. The intended effect of this measure is to allow taxpayers to adopt a more appropriate useful life and encourage investment and hiring in research and development.
Investing in the technology workforce and digital skills pipeline
Additional funding has been allocated to support Australia's technology workforce and build a pipeline of digitally skilled workers including in the specific areas of Artificial Intelligence (AI), emerging technologies and cyber security. In particular:
- AUD 43.8 million has been allocated over three years from 2021-22 to expand the Cyber Security Skills Partnership Innovation Fund to improve the quality and quantity of cyber security professionals in Australia;
- AUD 24.7 million has been allocated over six years from 2021-22 to establish the Next Generation AI Graduates Program to attract and train AI specialists through a national scholarship program;
- AUD 22.6 million has been allocated over six years from 2021-22 to establish the Next Generation Emerging Technologies Graduates Program to provide up to 234 scholarships in areas of emerging technologies; and
- AUD 10.7 million has been allocated over three years from 2021-22 to trial up to four industry-led Digital Skills Cadetship pilots to develop new and innovative pathways to increase the number of Australians with high level digital skills.
Telecommunications sector measures
Several funding measures acknowledge the importance of secure, reliable and accessible mobile telecommunications and broadband infrastructure to the digital economy, including:
- AUD 31.7 million over four years from 2021-22 to enhance the security of Australia's mobile networks and accelerate the commercialisation of sovereign network and data security solutions;
- AUD 16.4 million over three years from 2021-22 to establish a Peri-Urban Mobile Program to improve mobile phone reception in peri-urban fringe areas that are prone to bushfires; and
- AUD 7.7 million over four years from 2021-22 for the Australian Competition and Consumer Commission to continue and extend the Measuring Broadband Australia program, which will be extended to cover fixed wireless broadband services.
There are also a range of measures to enhance the digital delivery of government services (including the Government's use of data) and promote digitalisation of small and medium enterprises (SMEs).
For further information, please contact us.
Thank you to Jarrod McCulloch-Bayliss for his assistance with preparing this alert.