Entity Setup
Entity Setup and the Global Minimum Tax: Structuring for Multinational Compliance
For entities operating across borders, understanding the ATO’s Global and Domestic Minimum Tax regime and the compliance burden is now essential — here’s how to align structure, reporting and operations.
By NomadicTax Research Team • 5-8 min read • September 13, 2026
## Understanding the Global & Domestic Minimum Tax regime
Australia implemented Pillar Two of the OECD’s Two-Pillar framework via the **Taxation (Multinational—Global and Domestic Minimum Tax) Act 2024**. Under this regime:
- **15% global minimum tax** applies to large multinational enterprise (MNE) groups via the Income Inclusion Rule (**IIR**) starting fiscal years **on or after 1 January 2024**. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-19a11d5f-5a98-4cff-ba03-5aea1b50aaf2?utm_source=openai))
- The Undertaxed Profits Rule (**UTPR**) applies from 1 January 2025.
- A **domestic minimum tax** also applies to Australian entities when foreign income is taxed below the 15% MNE benchmark. Reporting and top-up liability may be triggered. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-19a11d5f-5a98-4cff-ba03-5aea1b50aaf2?utm_source=openai))
## How ATO Reporting Tools Work for Entities
Digital service providers have launched a suite of **APIs** to support CGDMTR (Combined Global & Domestic Minimum Tax Return), which includes:
- Foreign lodgment notification when a Designated Local Entity (DLE) or Australian group entity isn’t lodging its GloBE Information Return locally.
- Australian IIR/UTPR top-up tax obligations.
- Domestic minimum tax top-up obligations. ([apiportal.ato.gov.au](https://apiportal.ato.gov.au/api-products/global-and-domestic-minimum-tax/global-and-domestic-minimum-tax-return-api?utm_source=openai))
These APIs are already active: entities that qualify must begin using them for applicable periods. Compliance is not optional.
## Structuring Strategies for Compliance
- **Consolidate entities where possible**: Simplifying corporate structure reduces the number of separate returns.
- **Align tax jurisdictions**: Ensure foreign branches or subsidiaries have records showing tax rates applied; aim to avoid under-taxation.
- **Improve data systems**: You'll need timely access to data like tax rates paid overseas, financials of subsidiaries, align with reporting standards, and integrate with APIs.
- **Manage inter-company transactions**: Transfer pricing becomes even more critical when calculating undertaxed profits under UTPR.
- **Audit readiness**: Document foreign tax payments, withholding, income inclusion – these will be scrutinised.
## Real-World Case Scenario
Suppose GlobalCo plc has Australian entity AG, subsidiaries overseas in Country X taxed at 10%, and Country Y taxed at 12%. AG must lodge GloBE Information Return, calculate IIR top-up for income from Country X & Y to raise them to 15%, and then possibly UTPR obligations if some didn’t participate. AG must use the ATO’s APIs, collect information from overseas subsidiaries, and ensure financial statements support these calculations. Failure risks penalties and unexpected liabilities.
## Timing and Costs to Plan For
- Set aside budget for system upgrades, especially for APIs, consolidation, and inter-entity communication.
- Bring your tax advisors in early; misunderstandings around period alignments, rates, and rules can be costly.
- Since fiscal years starting 1 January 2024 (or later) are affected, audit your 2024, 2025 financial records now.
## Future Risks & Policy Trends
- Countries refining Pillar Two rules may tighten thresholds, increase documentation requirements, or add punitive compliance costs.
- ATO capacity to verify foreign tax payment likely increasing — expect more scrutiny and stronger auditing.
- Non-compliance or under-reporting could lead to severe reputational, financial, and regulatory consequences.
## Summary
Entities with global operations must treat the Global and Domestic Minimum Tax regime as standard operating procedure—not optional. Align structures, gather data now, integrate with APIs, and keep everything transparent. Doing so will avoid surprises and ensure compliance in this evolving international tax landscape.