What are Pillar Two, IIR, DMT and UTPR?
- Pillar Two refers to the OECD’s global and domestic minimum tax framework aimed at ensuring large MNEs pay a minimum level of tax across jurisdictions. Under this system, Australia has introduced three main rules:
- Income Inclusion Rule (IIR)
- Domestic Minimum Top-Up Tax (DMT)
- Undertaxed Profits Rule (UTPR) – in effect for fiscal years starting 1 January 2024 (GloBE rules) and 1 January 2025 (UTPR). (ey.com)
Recent Developments & Guidance from ATO
- In April 2026, the Australian Taxation Office released updated website guidance clarifying how the rules apply to tax consolidated groups, how deferred tax assets are treated, and how tax cost setting works. (ey.com)
- Notably, a 30-day lodgment deferral was introduced for Domestic Minimum Tax Returns (DMTR) and for Sydney consolidated groups affected by “window period” events (acquisitions, consolidation) commencing 1 December 2021. (ey.com)
- The Qualified GloBE Taxes (Measures No.1) Determination 2026 was registered and is in effect, setting which jurisdictions qualify as having a GloBE tax. (ey.com)
Key Deadlines and Obligations
| Requirement | Applies To | Deadline / Period |
|---|---|---|
| First filings under GIR & IIR | In-scope MNE groups from fiscal year starting 1 Jan 2024 | 30 June 2026 for foreign lodgment notification, 31 July 2026 for DMTR and AIUTR |
| UTPR obligations | Relevant recent fiscal years from 1 Jan 2025 | Same as above |
Practical Steps to Ensure Compliance
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Identify whether your entity is in-scope: Determine if your group is subject to GIR, IIR, or UTPR rules by reviewing consolidated revenue, foreign income, and presence in international operations.
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Gather required data early: Data on temporary differences, deferred tax assets, jurisdictional income, tax paid abroad, carrying value knock-ons etc., must be accurate and auditable.
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Watch for transitional “window-period” events: Acquisitions or reorganisations dating back to December 2021 trigger deferral reliefs, but you need to document these events carefully. (ey.com)
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Update internal systems and reporting: Modify your tax accounting and consolidation systems to capture GloBE adjustments, ensure cost-setting for tax consolidated groups meets ATO’s revised guidance.
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Engage advisers with international tax experience: Given the complexity, early advisory input will save risks and avoid last-minute penalties.
Example Scenario
Multinational Group B is an Australian tax consolidated group with entities in several low tax jurisdictions. They have:
- An acquisition in March 2022
- Deferred tax assets from R&D in multiple jurisdictions
- Expect foreign tax credits under the Qualified GloBE taxes list
Under the new rules: they may defer certain filings until after 30-day relief due to that 2022 acquisition “window”, but must ensure deferred tax assets are calculated and documented under the new guidance. Missing this, risk penalties.
Why This Matters
The Pillar Two framework fundamentally shifts how MNEs are taxed globally. For Australia-based groups, late filings or misreporting can lead to cost: higher tax bills, reputational risk, penalties. These rules foster transparency, but require thoughtful adjustments to tax planning, corporate structures, and accounting practices.
By understanding these obligations early and adapting wisely, businesses can ensure compliance—and maintain competitive strength in a shifting global tax landscape.