Compliance
Pillar Two (Global Minimum Tax) – What Multinationals & Large Businesses Must Prepare for by June 2026
Australia’s Pillar Two rules bring new reporting obligations for multinational groups; the first returns are due 30 June 2026 for certain year ends—guidance on compliance steps and examples.
By NomadicTax Research Team • 5-8 min read • March 15, 2026
## What is Pillar Two and when does it start?
- Australia has implemented the OECD’s **Pillar Two** global minimum tax regime. It includes rules like the **Income Inclusion Rule (IIR)**, **Domestic Minimum Tax (DMT)**, and the **Undertaxed Profits Rule (UTPR)**. ([globaltaxnews.ey.com](https://globaltaxnews.ey.com/news/2025-2423-australia-publishes-pillar-two-compliance-and-administrative-guidance-first-returns-due-by-30-june-2026?utm_source=openai))
- These rules apply to **fiscal years starting on or after 1 January 2024** in many cases, and **1 January 2025** for UTPR. ([globaltaxnews.ey.com](https://globaltaxnews.ey.com/news/2025-2423-australia-publishes-pillar-two-compliance-and-administrative-guidance-first-returns-due-by-30-june-2026?utm_source=openai))
- The **first Pillar Two returns** under the IIR/DMT are due by **30 June 2026** for multinational enterprise (MNE) groups with December year ends. ([globaltaxnews.ey.com](https://globaltaxnews.ey.com/news/2025-2423-australia-publishes-pillar-two-compliance-and-administrative-guidance-first-returns-due-by-30-june-2026?utm_source=openai))
## Who is in scope?
- Entities part of a multinational group with global revenue above established thresholds. In Australia’s case, about **6,000 MNE groups**, only around **135 headquartered in Australia**. ([ato.gov.au](https://www.ato.gov.au/media-centre/key-developments-in-tax-administration-in-australia?utm_source=openai))
- Both Australian and foreign-headquartered groups with Australian operations can be subject to these obligations. ([globaltaxnews.ey.com](https://globaltaxnews.ey.com/news/2025-2423-australia-publishes-pillar-two-compliance-and-administrative-guidance-first-returns-due-by-30-june-2026?utm_source=openai))
## Key compliance steps
- **Understand your group’s structure**: Identify all constituents, revenue, jurisdictions, and whether some parts may be excluded or exempt.
- **Set up data-collection systems**: Financial reporting, tax paid, effective tax borne, and cross-border flow data are needed. ATO is developing systems and tools. ([ato.gov.au](https://www.ato.gov.au/media-centre/key-developments-in-tax-administration-in-australia?utm_source=openai))
- **Assess potential minimum tax liability**: Run modeling scenarios to estimate whether the group will pay the global minimum, or whether top-ups will be needed.
- **Watch transition and penalty relief periods**: ATO has committed to transitional administrative approach, including relief on penalties where reasonable steps taken. ([ato.gov.au](https://www.ato.gov.au/media-centre/key-developments-in-tax-administration-in-australia?utm_source=openai))
## Example situation
XYZ Ltd is an MNE headquartered abroad with Australian subsidiaries.
- Revenue exceeds thresholds. It has a December-ended year.
- For fiscal year ending December 2024, under IIR/DMT rules the group must prepare and lodge a Pillar Two return by **30 June 2026**.
- In preparing, it must gather: income, taxes paid, effective tax rate in each relevant jurisdiction, and compare to 15% minimum rate. If a low rate in any jurisdiction, compute top-ups.
## Risks of non-compliance
- Late or incorrect lodgments may attract penalties once transition periods are over. ([ato.gov.au](https://www.ato.gov.au/media-centre/key-developments-in-tax-administration-in-australia?utm_source=openai))
- Reputational risk: Public country-by-country reporting and transparency regimes mean disclosures will be visible. ([ato.gov.au](https://www.ato.gov.au/media-centre/key-developments-in-tax-administration-in-australia?utm_source=openai))
- Financial exposure: underestimation of liability, or failure to manage group risk properly, can lead to unexpected tax and interest charges.
## Action plan for businesses
1. Conduct a **gap analysis** now—compare existing tax and financial reporting with Pillar Two requirements.
2. Engage external advisers experienced with international taxation if needed.
3. Engage with ATO guidelines, exposure drafts, keep up-to-date with practical compliance guideline PCG 2025/4. ([globaltaxnews.ey.com](https://globaltaxnews.ey.com/news/2025-2423-australia-publishes-pillar-two-compliance-and-administrative-guidance-first-returns-due-by-30-june-2026?utm_source=openai))
4. Prepare internal compliance frameworks: governance, documentation, intercompany pricing, disclosure of low tax jurisdictions.
**Bottom line**: For large and multinational entities, Pillar Two is no longer theoretical—it’s reality. First returns are due 30 June 2026, so get preparatory work underway now to avoid penalties and maximize compliance.