What Has Changed?
Australia now enforces key elements of the OECD Pillar Two global minimum tax rules—both the Income Inclusion Rule and the Undertaxed Profits Rule are in effect. Broadly speaking, large multinational enterprise (MNE) groups with global revenue of EUR 750 million or more must ensure that they pay at least 15% tax in each jurisdiction where they do business.(ato.gov.au)
This also includes a domestic minimum tax for income earned at home that is taxed below that 15% rate.(ato.gov.au) The law—encompassing the Taxation (Multinational—Global and Domestic Minimum Tax) Act 2024—has already received Royal Assent and been registered; rules are live and applicable starting from fiscal years on or after 1 January 2024 (Income Inclusion Rule) and 1 January 2025 (Undertaxed Profits Rule).(ato.gov.au)
Who Must Comply
If your business is a large MNE with global turnover equal to or above EUR 750 million, or a domestic multinational with similar exposure, you are likely in scope. Entities with foreign operations, subsidiaries, or foreign-controlled entities should carefully assess whether the new rules apply.(ato.gov.au)
Key Planning and Compliance Steps
- Assess your jurisdictional effective tax rates to identify where “top-up tax” might be payable. If a foreign jurisdiction taxes earnings at less than 15%, Australia may impose supplementary tax.
- Prepare to lodge the Global Anti-Base Erosion (GloBE) Information Return (GIR). The ATO is developing its systems and API tools to allow for lodging of GIRs and domestic reporting forms.(softwaredevelopers.ato.gov.au)
- Ensure transfer pricing documentation, structured group agreements, and global financing strategies align with the GloBE model rules.
- Look at debt-heavy financing structures: the thin capitalisation and debt deduction creation rules already tightened limitations on interest deductions.(ato.gov.au)
Examples
- A Germany-based parent company with subsidiaries in several FX jurisdictions where local tax rates are below 15% may now owe extra tax in Australia, if the effective rate in those jurisdictions is too low under the GIR or UTPR.
- An Australian multinational with internal debt arrangements should review whether related-party interest payments may be disallowed or taxable under the DDCR (Debt Deduction Creation Rules). Those disallowed deductions can’t be carried forward under some tests.(ato.gov.au)
Actionable Advice
- Map your global income, deductions, and tax base across jurisdictions to understand exposure.
- Review intercompany agreements and financing structures now rather than waiting for audits.
- Engage with tax advisors to develop systems capable of delivering compliance with GIR and domestic income reporting—custom software, API submissions or use of DSPs.
- Stay up to date with ATO guidance—look out for Practice Statements or public guidance documents that clarify grey areas.
Understanding Pillar Two is no longer optional—it’s law. Large MNEs must shift from planning future compliance to implementing it now.