Entity Setup
How Australia’s New Global Minimum Tax Shapes Multinational Entity Strategy
Australia has enacted Pillar Two of the OECD/G20 tax reforms. Multinationals must now navigate new global & domestic minimum tax rules, with new compliance obligations.
By NomadicTax Research Team • 6 min read • November 23, 2025
## Understanding the Global and Domestic Minimum Tax
Australia has formally **implemented Pillar Two of the OECD/G20 Two-Pillar Solution**, introducing both a global minimum tax (GMT) and a domestic minimum tax (DMT). The global rules require multinational enterprise (MNE) groups with annual global revenue above EUR 750 million to pay a minimum 15% tax in each jurisdiction where they operate. The domestic minimum tax gives Australia first claim to top-up taxes where domestic entities are taxed below 15%. ([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))
| Rule | Effective From | Key Implications |
|------|------------------|------------------|
| Income Inclusion Rule (IIR) | Fiscal years starting 1 January 2024 | Parent entities may pay top-up tax on low-taxed foreign income ([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) | Fiscal years starting 1 January 2025 | Applies to entities where IIR does not capture profits; additional top-up tax may apply ([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 | From 1 January 2024 | Australia applies top-up tax locally if domestic effective tax rate is below 15% ([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)) |
## Strategic Actions for Multinational Entities
### 1. Tax Structure & Entity Location Review
- Identify all jurisdictions of operation and current effective tax rates. If overseas entities are taxed below 15%, consider restructuring to minimise exposure to IIR or UTPR top-ups.
- Review where your designates Local Filing Entity might be, as it will likely lodge the GloBE Information Return (GIR) and other required domestic filings. ([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))
### 2. System & Reporting Readiness
- Keep systems updated to capture necessary financial data across jurisdictions for GIR, IIR, UTPR, and DMT (Domestic Minimum Tax) compliance. ([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))
- Evaluate software capable of handling new XML schema for GIR and the API portals being offered by the ATO. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/Pillar2_20250305?utm_source=openai))
### 3. Timing & Transitional Relief
- First GIR lodgments will generally be due **15 months after fiscal year-end**, with 18 months for first in-scope years. Be aware of these deadlines. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/closed-groups/australian-banking-association-steering-group-key-messages-22-may-2024?utm_source=openai))
- Some groups may get transitional or penalty relief as frameworks roll out. Negotiation and early action can help. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/closed-groups/australian-banking-association-steering-group-key-messages-22-may-2024?utm_source=openai))
## Practical Example
Suppose Company A, headquartered in Australia, has subsidiaries in Country X where corporate tax is 10%. Under IIR, Company A may need to pay a top-up tax in Australia to bring the effective rate of Country X income up to 15%. If another subsidiary in Australia is taxed at 12%, DMT applies to lift local tax rate to 15% on its profits.
## Summary & Takeaways
- These minimum tax rules are **law and effective now** for many MNEs. Ignoring them risks under-reporting, penalties, and reputational damage.
- Early structuring, strong data systems, and compliance planning are essential.
- Companies should engage with tax advisers to understand how the IIR, UTPR, and DMT apply in their jurisdictional mix.
By proactively aligning with these rules, multinationals can avoid unexpected tax liabilities and ensure compliance with Australia’s shift towards equitable international tax standards.