Compliance
Tax Compliance Spotlight: Australia’s Pillar Two Minimum Tax Rules Now In-Force & What Businesses Need to Do
Global Anti-Base Erosion (“Pillar Two”) rules kicked in from 1 January 2024 (IIR and domestic minimum tax) and 1 January 2025 (UTPR), creating new reporting obligations and minimum tax liabilities for multinationals and large groups.
By NomadicTax Research Team • 5-8 min read • November 23, 2025
## What Are the Pillar Two Rules?
Australia has implemented the OECD/G20 **Two-Pillar Solution**, including the **Global Anti-Base Erosion (GloBE) Rules**, which introduce:
- **Income Inclusion Rule (IIR)** and **Domestic Minimum Tax**: Applicable for fiscal years starting **1 January 2024**. ([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)**: Effective for 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))
These rules aim to ensure multinational enterprise (MNE) groups pay at least **15% tax** in every jurisdiction where they operate. If effective tax rates elsewhere are below 15%, **top-up taxes** may apply. ([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))
## Compliance Obligations for Businesses
- Need to prepare **GIR (GloBE Information Return)** and domestic forms. The ATO is developing lodgment channels (API portal, combined forms) for these. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/Pillar2_20250305?utm_source=openai))
- Multijurisdictional groups must track foreign effective tax rates, compute top-ups, and understand how UTPR and IIR interact depending on where the profits are generated. Accurate data on foreign profits, taxes paid, branch operations, and ownership of controlled entities is critical. ([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))
## Examples of Situations Impacted
- An Australian parent company with subsidiaries in countries with low tax rates (<15%) may need to pay additional tax in Australia or enforce UTPR on other constituent entities.
- A foreign-owned company with operations in Australia could see its overseas profits subject to additional Australian tax under these new rules.
## Action Guide for Compliance
1. **Identify whether your organisation qualifies** as a multinational entity in scope: size, global revenues, presence in multiple jurisdictions.
2. **Set up internal data systems** to collect necessary information: foreign tax rates, profits, expenses, effective tax rates, controlling entity status.
3. **Engage specialist tax advisors**—both domestic and international—to ensure correct interpretation and application of IIR, UTPR, and related rules.
4. **Monitor legislative instruments from ATO** and Treasury to stay updated on guidance and forms—e.g., GIR, domestic minimum tax schedules. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/Pillar2_20250305?utm_source=openai))
## Implications & Risks
- **Risk of under-reporting**: Miscalculating your effective tax rate abroad can lead to unexpected liabilities.
- **Penalties**: ATO enforcement and compliance scrutiny have increased under these measures.
- **Planning opportunity**: Consider restructuring operations, inter-company fees, or profit-shifting arrangements—but only under legal and ethical frameworks.
**Conclusion**: Businesses with multinational operations or foreign branches need to ensure they are ready for the GloBE rules—serving filing obligations, calculating minimum tax, and reporting accurately to avoid penalties and unexpected tax exposure.