Compliance
Compliance Spotlight: Global Minimum Tax (Pillar Two) and What Businesses Must Do Now
As the global minimum tax regime nears enforcement, Australian businesses must understand in-scope obligations and plan for compliance to avoid penalties.
By NomadicTax Research Team • 5-8 min read • November 23, 2025
## What is Pillar Two / Global and Domestic Minimum Tax
Stemming from OECD’s Two-Pillar solution, **Pillar Two** includes a **Global Anti-Base Erosion (GloBE) Income Inclusion Rule (IIR)** and **Undertaxed Profits Rule (UTPR)**. Australia is implementing both, with **Domestic Minimum Tax (DMT)**, affecting large multinational entities (MNEs). ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/Pillar2_20250305?utm_source=openai))
- IIR and DMT are effective for income years starting **1 January 2024**. UTPR begins **1 January 2025**. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/Pillar2_20250305?utm_source=openai))
## Who Is In Scope?
- MNEs with **consolidated financial statements** exceeding EUR 750 million.
- Australian operations part of the MNE group, including foreign-owned and domestic groups.
- Entities must prepare GloBE Information Returns (GIR) and domestic tax forms for top-up taxes. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/Pillar2_20250305?utm_source=openai))
## Key Compliance Steps
1. **Assess your group size**: Calculate consolidated revenue to see if you meet the threshold.
2. **Prepare systems for data collection**: Financial, tax, intercompany, intangible asset data needed.
3. **Monitor law and guidance release**: ATO is finalizing guidance materials and working with software providers. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/Pillar2_20250305?utm_source=openai))
4. **Plan for transitional relief**: The ATO has indicated a **lenient approach to penalties** if reasonable measures are taken during transition. ([ato.gov.au](https://www.ato.gov.au/media-centre/key-developments-in-tax-administration-in-australia?utm_source=openai))
## Example: Applying the Rules
> Suppose GlobalTech Ltd, a US-headquartered company with Australian subsidiaries, has global revenue of EUR 1.5 billion. The group must file a GIR, determine if any top-up tax under IIR or DMT applies. If some subsidiaries had very low taxes abroad, top-up tax may be payable in Australia. The compliance deadline aligns with 15 months after year end (extended in first year). Software partners and internal systems must support this reporting. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/Pillar2_20250305?utm_source=openai))
## Risks & Challenges
- Poor data quality, especially on intangibles and related parties.
- Mis-characterising payments for royalties or intangible use can trigger liability (e.g., under royalty withholding tax or Diverted Profits Tax). Agencies are actively auditing “data-centres” and IP structure abuse. ([ato.gov.au](https://www.ato.gov.au/media-centre/key-developments-in-tax-administration-in-australia?utm_source=openai))
- Tight timeline: First GIRs due for year ends starting 1 Jan 2024 will be due around mid-2025 or 2026 depending on the financial year. Don’t wait until just before due date.
## Actionable Advice
- Conduct a **gap-analysis** now: Map data flows, identify missing info on foreign tax, intertwined entities, or intangible arrangements.
- Collaborate with accounting software providers to ensure standardised reporting output.
- Seek external review or advisory input where treaty overlap, tax credits, or IP payments are involved.
- Stay tuned for PCGs or Practice Compliance Guides issued by ATO in coming months. ([ato.gov.au](https://www.ato.gov.au/media-centre/key-developments-in-tax-administration-in-australia?utm_source=openai))