The Game Development Sector Rebate, introduced by the last Labour-led Government, currently offers a 20% rebate, capped at $3m per recipient.
The industry had complained it was bleeding talent to Australia, where a federal 30% rebate was offered (which could reach 40 to 45% with state incentives) and the highly subsidised film industry.
Half the money left on the table
The scheme is budgeted at $40m per year, but around half has been left on the table since it was introduced in 2023 (last year, only $21.9m was claimed in rebates).
The NZ Game Developers Association – whose director Lance Burgess worked with NZ First on its policy – has long said the biggest studios can spend far more than $3m on a big game.
The cap could be lifted while staying within the $40m budgeted for the scheme.
NZ First says it would lift the cap so a gaming studio could claim up to $10m in rebates per year.
It has also raised the budget for the rebate from $40m to $45m per year.
It would also lower the eligibility threshold from a company with revenue of $250,000 per year to $150,000.
NZ First also promised to ‘baseline’ or make funding permanent for the Centre of Digital Excellence (Code), which offers grants to small game developers.
The party has also pledged to raise Code’s funding from $5m to $8m per year by 2028.
Code has seen the establishment of 20 new studios, with one becoming so successful that its corporation tax paid in the last few years has paid for CODE’s original provincial 6-year grant programme, NZ First said.
The only other party to release a video game policy is Labour, which has promised to increase the rebate from 20% to 25% and lower the eligibility floor to $200,000.
Big profits are being made, and going offshore
There is one issue with optics.
The largest local studio, West Auckland’s Grinding Gear Games – maker of the global fantasy hit Path of Exile – is owned by Chinese conglomerate Tencent.
Grinding Gear Games made a net profit of $191.7m on $526m revenue for the 15 months to December 31, 2025 (an extended period as it moved the end of its financial year to match its parent).
It also paid a $110.2m dividend to Tencent, up from the prior year’s $98.7m.
Grinding Gear Games has also received the maximum $3m from the sector rebate for each of the past two years.
Another major player Auckland and Dunedin-based Rocketwerkz, is 47% owned by Tencent, while Auckland smartphone and tablet game maker Ninja Kiwi (maker of the enduring global hit Bloons) was bought out by Sweden’s MTG for $203m in 2021.
Retain skills
What is the rationale for highly profitable, offshore-owned game developers to get their tax rebate bumped to up to $10m per year?
“The reason for these setting changes in this policy is to encourage smaller businesses in this field to start and to grow here,” a NZ First spokesman told the Herald.
“This will not only retain the skills and expertise here in New Zealand, it will allow our economy the potential to be part of the growing industry.
“The current settings already allow for the larger companies to utilise the rebate system. We are making changes to allow for more competition and greater development within New Zealand.”
‘$9.73 back for every $1 spent’
“The return to New Zealand for every dollar spent is immense – up to nine times more, and the productivity of all of the companies qualifying for the rebate add to that return to New Zealand,” the spokesman said.
In 2026 the rebate paid out $21.9m to local studios and returned $213m in income tax and PAYE. The return to the Government is $9.73 for every dollar invested, according to a survey by the NZGDA.
“This policy is about growth and the future of a massive worldwide sector that New Zealand needs to get ahead of,” the NZ First spokesman said.
The global video game industry, at US$184b ($324.7b), dwarfs the US$33.9b ($59.8b) global box office and US$28.6b ($50.4b) global music industries combined, the spokesman said.
Keeping jobs in NZ
Grinding Gear Games co-founder Chris Wilson earlier told the Herald his firm had been considering opening operations across the Tasman before the local rebate was introduced.
Game development had to stay local to qualify for the incentive.
Since being bought by Tencent in 2018, Grinding Gear Games’ staff had increased from 114 to a recent 260 – all based in Henderson.
The total number of people employed by the sector fell by 157 to 1257 in FY2026 after two setbacks.
Wētā Workshop decided to refocus on movies after its first major gaming video game drew mixed reviews, while crypto, NFT and gaming company Futureverse collapsed in a heap.
NZ on Air, which administers the gaming sector rebate, is investigating alleged discrepancies in financial information in Futureverse’s applications that saw it receive a $3m payout in 2024 and $2.3m in 2025.
“Doubling the rebate rate to 40% and lifting the amount studios can claim. Those are the settings our studios need to grow faster, keep our graduates onshore, and put the sector on a credible path to $2b in export revenue by 2030,” NZGDA executive director Joy Keene told the Herald.
NZGDA board member Burgess (who is also CFO of New Zealand’s second-largest game developer, the locally owned, Wellington-based PikPok), said: “Our Code incubator funnels in promising projects that might never have been funded. The GDSR scales up studios and helps turbocharge the industry toward $2b revenue.
“Increasing the GDSR cap ensures our big studios continue to grow in NZ,” Burgess said.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
