Entity Setup
How Global Minimum Tax Rules Under Pillar Two Will Impact Australian Multinationals
Learn what Australia’s implementation of OECD’s Pillar Two means for multinational groups, and how to plan for new reporting, compliance, and potential tax costs beginning mid-2024 to 2026.
By NomadicTax Research Team • 5-8 min read • March 21, 2026
## What Is Pillar Two / GloBE Rules?
Pillar Two of the OECD/G20 Two-Pillar Solution includes the **Global Anti-Base Erosion (GloBE) model rules**, designed to ensure multinational enterprise (MNE) groups pay a minimum effective tax rate (15%) in each jurisdiction where they operate. Australia passed implementing laws with an **Income Inclusion Rule (IIR) from FY 2024** and an **Undertaxed Profits Rule (UTPR) from FY 2025**. ([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))
## Who Is Affected?
- MNEs with presence in Australia and …
* Foreign- or domestically headquartered and
* Having revenues and/or operations such that they meet the thresholds \(approx. 100-250 million EUR equivalent under the OECD regime\).
- Specifically: The ATO estimates ~**6,000 groups** with Australian operations in scope. Only ~135 are headquartered in Australia. ([ato.gov.au](https://www.ato.gov.au/media-centre/key-developments-in-tax-administration-in-australia?utm_source=openai))
### Key Reporting & Compliance Requirements
| Requirement | First due date | What needs to be filed |
|-------------|----------------|-------------------------|
| Global / Domestic minimum tax information returns | **30 June 2026** | Forms including GloBE Information Return (GIR), Income Inclusion Return (IIR), Undertaxed Profits Rule return etc. ([ato.gov.au](https://www.ato.gov.au/media-centre/key-developments-in-tax-administration-in-australia?utm_source=openai)) |
## Action Steps: What Multinational Businesses Should Do
1. **Assess scope**: Determine if your group meets the thresholds and is impacted under IIR/UTPR.
2. **Prepare reporting systems**: Collect data on all entities, jurisdictions, revenues, profits, and taxes paid. System design for GIR & domestic forms is underway. ([ato.gov.au](https://www.ato.gov.au/media-centre/key-developments-in-tax-administration-in-australia?utm_source=openai))
3. **Consider transitional relief**: The ATO has indicated that **penalties/sanctions** will be eased where reasonable measures are taken during the transition period.
4. **Engage advisors**: Accounting and tax professionals familiar with global tax / OECD rules can help model your effective tax rate and ensure correct jurisdictions are included.
5. **Monitor guidance**: ATO is releasing further guidance, software tools, and forms, especially via the API portal. ([ato.gov.au](https://www.ato.gov.au/media-centre/key-developments-in-tax-administration-in-australia?utm_source=openai))
## Practical Example
Consider “XYZ Pty Ltd”, a U.S.-parented multinational with operations in Australia, EU, and Asia. Under Pillar Two, if the effective tax paid in a low-tax foreign jurisdiction is below 15%, XYZ will face income inclusion in Australia and possibly a top-up tax via the UTPR mechanism to align that jurisdiction to the 15% minimum.
## Why This Matters Globally
- **Revenue assurance**: Helps prevent erosion of tax base via profit shifting.
- **Risk management**: Non-compliance may lead to increased audits or reputational risk.
- **Strategic structuring**: MNEs may rethink jurisdiction entries, supply chain, or financing arrangements to manage effective tax rate across jurisdictions.
Digital nomads, small businesses, or non-MNEs are less likely to be directly affected, but may see downstream effects through market competition or tax code harmonization.