Compliance
Navigating the Global & Domestic Minimum Tax Rules: What Multinationals In Australia Must Know
Australia has implemented new minimum tax rules as part of its Pillar Two commitments—key for any large multinational operating with low effective tax rates overseas.
By NomadicTax Research Team • 5-8 min read • May 11, 2026
## What are the Global and Domestic Minimum Tax Rules?
Australia has implemented key parts of Pillar Two of the OECD/G20 Two-Pillar Solution—known as the **Global and Domestic Minimum Tax**. These rules require large multinational enterprise (MNE) groups (with global revenue ≥ EUR 750 million) to ensure their effective tax rate is at least **15%** in every jurisdiction they operate, or face top-up tax liabilities. ([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 components include:
- **Income Inclusion Rule (IIR)**: applies for fiscal years from **1 January 2024**. Under the IIR, top-up tax may be applied to Australian resident multinational parent entities if income taxed overseas has an effective rate 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))
- **Undertaxed Profits Rule (UTPR)**: acts as a back-stop where no IIR applies; effective 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))
- **Domestic Minimum Tax (DMT)**: gives Australia priority to tax low-taxed domestic profits if the country's own tax on those profits is below 15%. Also effective 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))
## Who’s Affected & Key Deadlines
| Entity Type | Global Revenue Threshold | Relevant Date for Application |
|-------------|---------------------------|-------------------------------|
| Multinational groups with ≥ EUR 750 million turnover | Yes | IIR & DMT: from 1 January 2024; UTPR: from 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)) |
These MNEs should have lodged their first Combined Global & Domestic Minimum Tax Return (CGDMTR) where required and be aware of possible top-up tax obligations. The ATO now provides API lodgment tools for this purpose. ([apiportal.ato.gov.au](https://apiportal.ato.gov.au/api-products/global-and-domestic-minimum-tax?utm_source=openai))
## Practical Examples & Implications
- **Scenario 1:** An Australian parent company has subsidiaries in multiple countries. If one foreign subsidiary pays taxes at an effective rate of 10%, Australia may apply top-up tax so that the total taxation meets the 15% minimum rate (using IIR).
- **Scenario 2:** If no IIR applies, the UTPR could allow Australia to allocate liability for under-taxed profits back to its jurisdictional entities.
## Action Checklist for Compliance
- Identify whether your group meets the **EUR 750 million** threshold.
- Determine all jurisdictions where you operate and compute effective tax rates.
- Keep records necessary for CGDMTR, GIR, UT.P.R. filings.
- Update your accounting systems and tax reporting tools to reflect the new rules.
- Consult with international tax advisors to assess double tax issues, treaty positions, and possible reliefs.
## Why This Matters
These changes enhance global tax fairness and prevent profit shifting. Non-compliance can carry penalties and reputational risks. For large multinationals, ensuring accurate calculation of taxable income and timely lodgments is now non-optional—it’s essential for legal and operating certainty in Australia.
Australia’s implementation is now **law**, under the Taxation (Multinational—Global and Domestic Minimum Tax) Act 2024 and related legislation. ([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))