Entity Setup
Planning for Pillar Two: Global and Domestic Minimum Tax Strategies for Multinational Entities
With Australia implementing the GloBE rules and introducing Domestic Minimum Tax, multinational businesses must adjust their planning and reporting strategies to align with global 15% minimum tax expectations.
By NomadicTax Research Team • 5-8 min read • August 29, 2026
## Understanding Australia’s Pillar Two Implementation
Australia has legislated the **OECD Global Anti-Base Erosion (GloBE) Rules** and a **Domestic Minimum Tax (DMT)** via the *Taxation (Multinational – Global and Domestic Minimum Tax) Act 2024*. These laws introduce new global and domestic top-up taxes to ensure large MNE groups pay an effective tax rate of **at least 15%** in every jurisdiction in which they operate. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/Pillar2?utm_source=openai))
Key elements include:
- **Income Inclusion Rule (IIR)**: applies to income years starting on or after **1 January 2024**.
- **Undertaxed Profits Rule (UTPR)**: applies from **1 January 2025**.
- **Domestic Minimum Tax (DMT)**: applies to domestic income‐earned by large multinationals to prevent low-taxed income inside Australia. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/Pillar2?utm_source=openai))
## Strategic Considerations for Multinational Entities
- **Review organisational structure**: entities with multiple related subsidiaries or joint ventures spanning multiple jurisdictions should assess how the IIR, UTPR and DMT interact across their group.
- **Effective tax rate (ETR) assessment**: ensure that low-tax income overseas is not underreported or shifted to avoid triggering top-up tax.
- **Transfer pricing and intangible asset planning** will be under more scrutiny, as shifting profits to low-tax jurisdictions may no longer avoid tax via these rules.
## Reporting & Compliance Inputs
- MNE groups must lodge a **Combined Global and Domestic Minimum Tax Return (CGDMTR)** via ATO’s API products. These include the:
- Global and Domestic Minimum Tax Return API
- Global and Domestic Minimum Group Entity Tax Return API
- Payment Reference Number API
- Use of approved XML schemas and alignment with communications from ATO software developers are required. Hiring competent agents and ensuring accurate data flows from all jurisdictions in the group is critical. ([apiportal.ato.gov.au](https://apiportal.ato.gov.au/api-products/global-and-domestic-minimum-tax?utm_source=openai))
## Example Scenario
Consider **GlobalSoft Pty Ltd**, headquartered in Australia, with subsidiaries in Country A (tax rate 10%) and Country B (tax rate 8%). Under the IIR, Australia may apply a top-up tax to bring the group’s ETR to at least 15%. Additionally, if domestic income in Australia is taxed below 15%, the DMT may trigger for that portion.
Planning tips:
- Avoid deferred income or tax accounting structures designed solely to reduce the appearance of ETR.
- Ensure mapping of income, deductions, and foreign tax credits is robust and audit ready.
## Risks & Practical Action
- **Legal & documentation risk**: Inter-company arrangements must have clear documentation. Transfer pricing policies must be updated to reflect new standards.
- **Systems & software readiness**: Ensure all reporting entities are digitally enabled to use ATO APIs, generate required forms, and populate schemas correctly.
- **Cash flow implications**: Top-up tax may require payments by Australian entities or through group entities—budgeting and forecasting should factor this in early.
## Take-Home Messages
1. Pillar Two is no longer theoretical—Australia’s legislation is in force, and obligations are live.
2. Transparency and accurate reporting across jurisdictions are essential.
3. Investments in compliance, transfer pricing, and systems infrastructure will pay off by mitigating risk.
Businesses that engage proactively will gain competitive advantage and avoid costly retroactive adjustments.