Compliance
Navigating Australia's Global and Domestic Minimum Tax: A Guide for Multinational Enterprises
An in-depth look at Australia's implementation of the OECD/G20 Pillar Two framework, focusing on the new global and domestic minimum tax rules and their implications for multinational enterprises.
By NomadicTax Research Team • 6 min read • November 13, 2025
## Introduction
In an effort to address the tax challenges arising from the digitalisation of the economy, Australia has implemented the Global Anti-Base Erosion (GloBE) Model Rules, introducing both a global and a domestic minimum tax. These measures aim to ensure that multinational enterprise (MNE) groups are subject to a minimum tax rate of 15% in each jurisdiction where they operate.
## Understanding the Global Minimum Tax
The global minimum tax comprises two interlocking rules:
- **Income Inclusion Rule (IIR):** This primary rule allows Australia to apply a top-up tax on Australian parent entities if the group's effective tax rate in another jurisdiction falls below 15%.
- **Undertaxed Profits Rule (UTPR):** Serving as a backstop, this rule permits Australia to impose a top-up tax on Australian constituent entities if the group's effective tax rate in another jurisdiction is below 15% and the profit isn't taxed under an IIR.
The IIR applies to fiscal years starting on or after 1 January 2024, while the UTPR takes effect for fiscal years beginning on or after 1 January 2025.
## The Domestic Minimum Tax
Complementing the global rules, Australia has introduced a domestic minimum tax that operates consistently with the GloBE Rules. This ensures that Australia has the primary right to impose a top-up tax on any low-taxed profits within its jurisdiction, taking precedence over the IIR and UTPR. The domestic minimum tax applies to fiscal years starting on or after 1 January 2024.
## Implications for Multinational Enterprises
MNEs with annual global revenues of EUR750 million or more are in scope for these new tax measures. Key considerations include:
- **Compliance Obligations:** MNEs must assess their global operations to determine where their effective tax rates fall below the 15% threshold and prepare for potential top-up tax liabilities.
- **Reporting Requirements:** The Australian Taxation Office (ATO) is developing systems to facilitate the lodgment of the GloBE Information Return (GIR) and the payment of any arising top-up tax liabilities.
- **Strategic Planning:** Companies should evaluate their tax structures and consider potential restructurings to mitigate additional tax liabilities under the new rules.
## Actionable Steps for MNEs
1. **Conduct a Comprehensive Review:** Assess all jurisdictions where the MNE operates to identify any with effective tax rates below 15%.
2. **Engage with Tax Professionals:** Collaborate with tax advisors to understand the nuances of the new rules and develop strategies to ensure compliance.
3. **Monitor ATO Guidance:** Stay updated with ATO publications and guidance to ensure timely compliance with reporting and payment obligations.
4. **Evaluate Tax Structures:** Consider restructuring operations or transactions to align with the new tax environment and minimize potential top-up taxes.
## Conclusion
Australia's adoption of the global and domestic minimum tax marks a significant shift in the international tax landscape. MNEs operating in Australia must proactively adapt to these changes to ensure compliance and optimize their tax positions.
**Source:** [Global and domestic minimum tax | Australian Taxation Office](https://www.ato.gov.au/businesses-and-organisations/international-tax-for-business/in-detail/multinationals/global-and-domestic-minimum-tax)