Entity Setup
Navigating Legislation Change: Australia’s Global & Domestic Minimum Tax Essentials for Multinationals
How the implementation of Pillar Two’s global and domestic minimum tax regimes impacts multinational businesses operating in Australia, and how to prepare.
By NomadicTax Research Team • 5-8 min read • November 22, 2025
## Understanding the Global & Domestic Minimum Tax
Australia has enacted legislation to implement **Pillar Two** of the OECD/G20 framework. This means large multinational enterprise (MNE) groups with consolidated global revenue ≥ EUR 750 million are now subject to:
- **Income Inclusion Rule (IIR)**: fiscal years starting from **1 January 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))
- **Undertaxed Profits Rule (UTPR)**: applies 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))
- A **15% domestic minimum tax** also applies from 1 January 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))
## Key Compliance Obligations
MNEs in scope must:
- Prepare and lodge a **GloBE Information Return (GIR)**, along with relevant Australian forms. ([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))
- Ensure systems (IT, reporting) align with regulatory requirements before first lodgments due **30 June 2026**. ([ato.gov.au](https://www.ato.gov.au/media-centre/key-developments-in-tax-administration-in-australia?utm_source=openai))
- Engage with guidance from the ATO and Treasury to clarify aspects like penalty relief during transitional periods. ([ato.gov.au](https://www.ato.gov.au/media-centre/key-developments-in-tax-administration-in-australia?utm_source=openai))
## Practical Steps for Affected Entities
1. **Audit your global footprint**: Identify low-tax jurisdictions where subsidiaries may be taxed below 15%, and map out global profits and tax paid.
2. **Invest in reporting systems**: Ensure your accounting software or ERP can capture data required for GIR, IIR, UTPR and domestic forms.
3. **Engage early with ATO guidance**: Participate in working groups and review draft guidance to get ahead.
4. **Assess tax positions & risk**: Evaluate intangible asset arrangements, royalty withholdings, and mischaracterisation issues flagged by ATO. ([ato.gov.au](https://www.ato.gov.au/media-centre/key-developments-in-tax-administration-in-australia?utm_source=openai))
## Case Example
*Company X* has subsidiaries in low-tax jurisdictions and had previously booked minimal tax liabilities overseas. Under the new rules, those profits will be assessed under UTPR or IIR, resulting in a potential **top-up tax** being applied in Australia to ensure a combined 15% tax burden. If Company X’s systems can’t produce GIR-compliant data by mid-2026, it risks failing to meet lodgment obligations and potentially incurring penalties after any transitional relief period ends.
## Takeaways
These reforms represent a major shift in international tax compliance. Multinationals must act proactively—upgrading systems, updating reporting practices, and ensuring advisers are aligned. Failing to comply with Pillar Two could lead not only to penalties but reputational risk.
**Category**: Entity Setup
**TaxHome**: Australia
**Author**: NomadicTax Research Team
**ReadTime**: 5-8 min
**Published**: true