Tax Planning
Top 5 Tax Planning Moves for Multinationals under Australia’s Global & Domestic Minimum Tax
Australia’s implementation of Pillar Two introduces a 15% minimum tax regime—here’s how multinationals can plan proactively to minimise exposure and adapt to reporting obligations.
By NomadicTax Research Team • 6 min read • November 22, 2025
## Understanding Australia’s Minimum Tax Regime
Australia has fully enacted its version of the OECD/G20 two-pillar solution through the **Taxation (Multinational–Global and Domestic Minimum Tax) Act 2024**, along with its Imposition Act and associated rules. These laws introduce a 15% global minimum tax on multinational groups. Key dates:
- **Income Inclusion Rule (IIR)** and **Domestic Minimum Tax** effective for fiscal years starting on or after **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))
- **Undertaxed Profits Rule (UTPR)** is in force 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))
Businesses with **global revenues ≥ EUR 750 million** are in scope. ([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))
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## Key Tax Planning Strategies
| Strategy | Explanation | Benefit | Action Steps |
|---|-------------|---------|--------------|
| **Review foreign jurisdictions’ effective tax rates** | Many low-tax jurisdictions may trigger top-up tax under IIR or UTPR. | Avoid surprises and reduce UTPR exposure. | Identify all entities nested within jurisdictions with ETR <15%. Consider restructuring or moving functions. |
| **Leverage the Domestic Minimum Tax** | If profit taxed in Australia has an effective rate <15%, the Domestic Minimum Tax may apply instead of IIR/UTPR. | Helps retain primary taxing rights and avoid complex foreign calculations. | Calculate Australian ETR on net taxable profit; forecast shortfalls. |
| **Assess intra-group financing and IP licensing** | Former rules like thin capitalisation and transfer pricing now interact with the new global minimum tax framework. | Risks of excess deductions or mischaracterised income. | Check interest expense allocations & licensing returns for consistency. Seek rulings in borderline cases. |
| **Prepare for enhanced reporting and compliance** | Companies must lodge the Global Information Return (GIR) plus domestic forms, possibly via API or structured channels. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/Pillar2_20250305?utm_source=openai)) | Missing lodgments or errors can lead to penalties or increased scrutiny. | Set up systems early, involve tax & IT teams, use approved schema. |
| **Consider timing of fiscal years and transitional reliefs** | Some rules like UTPR apply only after certain dates; transitional provisions may offer relief or deferment. | Helps manage when exposure begins | Align periods where possible; apply reliefs; model impact forward. |
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## Examples
- **Scenario**: A multinational has a subsidiary in Country A with a corporate tax rate of 10%. Under IIR, if the Australian head office is aligned, Australia could apply a top-up tax to bring the rate to 15%. If the group instead channels profits through Australia, Domestic Minimum Tax may apply first.
- **Scenario**: A company with large interest deductions under thin capitalisation needs to re-evaluate whether related-party debt meets third-party debt test; any excess interest may be disallowed, raising ETR, impacting minimum tax calculations.
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## Action Plan for Tax Departments
1. Undertake a **baseline ETR calculation** across all jurisdictions for FY2024 and FY2025.
2. Document international structures, including financing and IP flows; ensure transfer pricing policies reflect real operations.
3. Upgrade reporting systems to comply with GIR and domestic forms; test schema compatibility.
4. Monitor public guidance from the ATO: expected guidance on lodgment, decline to rule, transitional approach in late 2025. ([ato.gov.au](https://www.ato.gov.au/about-ato/ato-advice-and-guidance/advice-under-development-program/advice-under-development-international-issues?utm_source=openai))
5. Consider seeking **private rulings** if your structure raises complex issues, especially around attribution under UTPR or domestic minimum tax.
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## Risks & Common Pitfalls
- Overlooking jurisdictions with low ETR but low GDP—small jurisdictions may be overlooked but still in scope.
- Relying on outdated systems or templates not aligned to new schema requirements.
- Failure to plan for cash flow consequences of top-up tax liabilities — they may be payable well before refund from foreign jurisdictions.
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With Pillar Two now law in Australia, multinationals must shift from theoretical preparation to active planning. The sooner you engage with your structures, reporting systems, and compliance touchpoints, the fewer risks you’ll face—and the more opportunities to manage tax exposure proactively.