Compliance
Australia’s Pillar Two Rules & GloBE Regime: Compliance Guide for Multinationals
Australia’s global and domestic minimum tax rules are now in force for fiscal years starting 1 Jan 2024. Multinational enterprises with large operations must prepare to meet new reporting and penalty regimes.
By NomadicTax Research Team • 5-8 min read • March 17, 2026
## What Are the Pillar Two / GloBE Rules?
Australia has implemented **OECD-aligned global minimum tax rules** (commonly known as **Pillar Two / GloBE**) that apply to multinational groups. These measures include:
- An **Income Inclusion Rule (IIR)** and **Domestic Minimum Tax (DMT)**, effective from **1 January 2024** for fiscal years starting on or after that date. ([globaltaxnews.ey.com](https://globaltaxnews.ey.com/news/2025-1138-australian-tax-office-updates-pillar-two-website?utm_source=openai))
- An **Undertaxed Profits Rule (UTPR)** applying from fiscal years starting on or after **1 January 2025**. ([globaltaxnews.ey.com](https://globaltaxnews.ey.com/news/2025-1138-australian-tax-office-updates-pillar-two-website?utm_source=openai))
These rules function to ensure that Australia and other jurisdictions can collect a minimum level of tax on profits where entities are under-taxed abroad.
---
## Who Is In Scope
- Multinational Enterprise Groups (MNEs) with **consolidated revenue ≥ €750 million** in at least two of the four previous fiscal years. ([globaltaxnews.ey.com](https://globaltaxnews.ey.com/news/2025-1138-australian-tax-office-updates-pillar-two-website?utm_source=openai))
- Both **Australian headquartered** and **foreign headquartered** groups with operations in Australia. Estimates suggest ~6,000 groups will be in scope, with about **135 headquartered in Australia**. ([ato.gov.au](https://www.ato.gov.au/media-centre/key-developments-in-tax-administration-in-australia?utm_source=openai))
---
## Key Compliance Requirements
1. **Record-keeping and financial reporting**: Need to maintain detailed records enabling reporting under the Pillar Two regime—including global effective tax rates, top-ups, and undertaxed profits. ([globaltaxnews.ey.com](https://globaltaxnews.ey.com/news/2025-1138-australian-tax-office-updates-pillar-two-website?utm_source=openai))
2. **Lodgment of GloBE Information Return (GIR)**: The earliest lodgments are **due by 30 June 2026** for in-scope MNEs. ([ato.gov.au](https://www.ato.gov.au/media-centre/key-developments-in-tax-administration-in-australia?utm_source=openai))
3. **Penalties and transitional relief**: For the transition period, if reasonable efforts are made, ATO intends to apply lenience in terms of penalties. ([ato.gov.au](https://www.ato.gov.au/media-centre/key-developments-in-tax-administration-in-australia?utm_source=openai))
---
## Practical Steps to Prepare
- **Audit existing structures**: Identify entities and intercompany flows that may generate low effective tax rates or be susceptible to foreign top-up tax.
- **Align accounting systems**: Ensure the financial statements track temporary differences, taxes paid abroad, and other elements needed for Pillar Two calculations.
- **Engage advisers early**: Given the complexity and interactions with transfer pricing, withholding, and treaty provisions, expert input is essential.
- **Document decisions and assumptions**: In the event of audits or later inquiries, clear documentation helps claim transitional relief.
---
## Example Scenario
A US multinational with Australian subsidiaries earning royalty income abroad may find that foreign tax was not sufficient. Under Pillar Two, the IIR may require them to pay top-up tax in Australia to bring their effective rate up to the minimum threshold.
If they structure royalty payments or licensing arrangements that fall under “mischaracterisation” rules, this could trigger significant adjustments. Close attention to how royalty vs non-royalty components are allocated will matter. ([ato.gov.au](https://www.ato.gov.au/media-centre/key-developments-in-tax-administration-in-australia?utm_source=openai))
---
## Impacts & Risks
- **High compliance and disclosure burden**: Especially for groups with operations in many countries. Systems must capture a wide range of data.
- **Potential increased tax liability**: In situations where foreign taxes are low or no top-ups are payable abroad.
- **Interaction with local taxes, transfer pricing, treaties**: Risks of inconsistencies or double taxation if not managed.
---
By understanding the scope, timing and requirements of Pillar Two / GloBE early, multinationals can best position themselves to comply efficiently and avoid unexpected costs.