Entity Setup

How Australia’s Global Minimum Tax Rules Transform International Business Structures

Explore how the implementation of the OECD Pillar Two global minimum tax in Australia changes strategies for multinationals and private groups operating cross-border and what you must do to stay compliant.

By NomadicTax Research Team • 5-8 min read • February 23, 2026

## Overview Australia has **enacted legislation** implementing the OECD’s **Pillar Two** measures (GloBE rules), effective from income years beginning 1 January 2024 (Income Inclusion Rule) and 1 January 2025 (Undertaxed Profits Rule) ([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)). These measures establish a **15% global minimum tax** for in-scope multinational enterprises (MNEs), and a domestic minimum tax where Australia has the first right to collect top-up tax if foreign profits are undertaxed ([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)). ## What entities are affected and how - Entities with **global revenue of EUR 750 million or more** are in scope. The rules affect both inbound and outbound income streams as per the OECD framework ([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)). - The **domestic minimum tax** ensures that profits taxed below 15% within Australia are subject to remedial action, even when foreign jurisdictions have lower rates or special regimes ([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)). - New rules have replaced or updated thin capitalisation and debt deduction rules. MNEs and private groups that formerly relied on related-party debt arrangements must check compliance under the new fixed ratio, group ratio and third-party debt tests ([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)). ## Actionable compliance and tax planning steps 1. **Assess whether your group is in scope** — review global turnover and foreign operations. If in scope, begin preparing for GIR (GloBE Information Return) lodgment, with first real lodgments due by **30 June 2026** for FYs starting 1 Jan 2024 ([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)). 2. **Revisit debt-financing structures**: analyze related party vs third party debt; ensure any deductions above the fixed or group ratio are defensible. Existing arrangements may need to be restructured to avoid disallowed deductions or unexpected denial under the new rules ([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)). 3. **Implement systems for information reporting**: Australia requires ladders of forms (Foreign Notification, IIR/UTPR, Domestic Minimum Tax forms) to be reported via the ATO’s new API portal and other channels ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/Pillar2_20250305?utm_source=openai)). 4. **Document your compliance posture**: maintain strong transfer pricing documentation, show arm’s length for debt terms, keep records supporting your test choices (fixed-ratio vs group vs third party) and highlight reasonable measures taken to comply, to take advantage of possible penalty relief during the transitional period ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/Pillar2_20250305?utm_source=openai)). ## Practical example Suppose an Australian company in a multijurisdictional group earns income overseas in a country with a 10% tax rate. Under Pillar Two, you may be required to pay **top-up tax** so that the effective rate is brought up to at least 15%. If your group has related party debt, and deductions exceeded the 30% fixed ratio test, some deductions may be disallowed. Structuring to use third party debt or group ratio may yield better outcomes. ## Key takeaways - Do **not wait**—even if first lodgments aren’t until mid-2026, planning and restructuring must start now. - Understand which test applies best for your group (fixed ratio, group ratio, third party) to maximize allowed deductions. - Secure your records and documentation around both earnings and debt, especially across jurisdictions. - Review and update accounting systems to capture required data for reporting and disclosure. Adapting to Australia’s global minimum tax regime isn't just about compliance—it’s a chance to optimize financings, reduce surprises, and ensure global structures are resilient under new integrity rules.