Entity Setup
How Australia’s Global Minimum Tax Requirements Affect Multinational Businesses
Explore how recent Australian legislation implementing OECD Pillar Two rules is reshaping tax obligations for large multinational enterprises, including what triggers reporting and how companies should prepare.
By NomadicTax Research Team • 6 min read • November 24, 2025
## Understanding Pillar Two and Australia’s New Minimum Tax Laws
In a move to align with the OECD/G20’s international tax framework, Australia passed legislation in late 2024 — the *Taxation (Multinational–Global and Domestic Minimum Tax) Act 2024* and its concomitant instruments — to implement the **global and domestic minimum tax**. This means multinational enterprise (MNE) groups will now be subject to a **15% effective tax rate** on income in jurisdictions where those groups previously enjoyed low tax rates.([ato.gov.au](https://www.ato.gov.au/businesses-and-organisations/international-tax-for-business/in-detail/multinationals/global-and-domestic-minimum-tax?utm_source=openai))
### Key Parts of the Rule
- **Income Inclusion Rule (IIR):** Allows Australia to apply a top-up tax on its resident parent entities if an overseas entity in the MNE group is taxed below 15%. Applies from fiscal years starting **1 January 2024**.([ato.gov.au](https://www.ato.gov.au/businesses-and-organisations/international-tax-for-business/in-detail/multinationals/global-and-domestic-minimum-tax?utm_source=openai))
- **Undertaxed Profits Rule (UTPR):** Acts as a backstop by taxing constituent entities located in Australia when profits aren’t brought into charge under IIR. Effective from fiscal years starting **1 January 2025**.([ato.gov.au](https://www.ato.gov.au/businesses-and-organisations/international-tax-for-business/in-detail/multinationals/global-and-domestic-minimum-tax?utm_source=openai))
- **Domestic Minimum Tax:** Ensures Australia can claim the primary right to top-up any low-taxed profits within Australia itself, in priority to IIR or UTPR.([ato.gov.au](https://www.ato.gov.au/businesses-and-organisations/international-tax-for-business/in-detail/multinationals/global-and-domestic-minimum-tax?utm_source=openai))
### Who Is Affected
- MNE groups with annual global revenue exceeding **EUR 750 million**.([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/in-detail/international/implementation-of-a-global-minimum-tax-and-a-domestic-minimum-tax?utm_source=openai))
- Australian entities that are part of these MNE groups, and foreign controlled privately owned entities with outbound operations.([ato.gov.au](https://www.ato.gov.au/businesses-and-organisations/international-tax-for-business/private-wealth-international-program/new-international-tax-measures-affecting-private-groups?utm_source=openai))
## Compliance Checklist: What Businesses Should Do Now
| Action Item | Purpose | Example Scenario |
|-------------|---------|-------------------|
| Err on early adoption | Forms and guidance are now available; some rules are already **law**. | Australian parent of a tax group with low foreign ETR should prepare for IIR starting FY2024. ([ato.gov.au](https://www.ato.gov.au/businesses-and-organisations/international-tax-for-business/in-detail/multinationals/global-and-domestic-minimum-tax?utm_source=openai)) |
| Invest in reporting infrastructure | New information returns including GIR, IIR/UTPR and domestic forms are required. API portal support is being built. | A group preparing for their first global minimum tax filing via ATO’s API portal. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/Pillar2_20250305?utm_source=openai)) |
| Assess internal debt and interest arrangements | New thin capitalisation alignment with OECD’s BEPS Action 4 may limit debt deductions. | Multinational with aggressive intercompany debt should model impact for FY2023–24 onwards. ([ato.gov.au](https://www.ato.gov.au/businesses-and-organisations/international-tax-for-business/private-wealth-international-program/new-international-tax-measures-affecting-private-groups?utm_source=openai)) |
| Seek expert advice | The rules are complex and have both international and domestic implications, especially with UTPR being backstop. | Company advisors reviewing total tax cost of operations in low-tax jurisdictions. |
## Practical Examples
- A large company with revenues of **EUR 1 billion**, with operations in jurisdictions where the ETR is at 10%, will face a 5% top-up tax under IIR applied to the resident parent. This may increase its overall tax settlement.
- An entity in Australia with $100 million of earnings located in Australia itself may have to pay domestic minimum tax on low taxed profits that aren't caught under IIR or UTPR.
## Looking Ahead
Australia is still developing guidance materials and forms to help businesses comply. Subordinate legislation, such as the computational rules, was registered in December 2024 and is now in force under law.([ato.gov.au](https://www.ato.gov.au/businesses-and-organisations/international-tax-for-business/in-detail/multinationals/global-and-domestic-minimum-tax?utm_source=openai))
To stay prepared:
- Run simulations of your global tax rate under the new rules,
- Track when income years begin (especially if they span the January 2024 and January 2025 date lines),
- Monitor guidance from the ATO and consult experts if operating cross-border.
**Category:** Digital Nomad | Entity Setup | Tax Planning
This framework represents one of the most significant shifts in international tax enforcement in decades. Australia is holding multinational groups to higher standards, and businesses must adapt now to avoid unexpected liabilities.