Implementation of a global minimum tax and a domestic minimum tax

Pillar Two

On 9 May 2023, as part of the 2023–24 BudgetExternal Link, the Government announced it will implement key aspects of Pillar Two of the OECD/G20 Two-Pillar Solution to address the tax challenges arising from digitalisation of the economy.

Proposed changes include a:

• 15% global minimum tax for large multinational enterprises with the    
  • Income Inclusion Rule applying to fiscal years starting on or after 1 January 2024, and
  • Undertaxed Profits Rule applying to fiscal years starting on or after 1 January 2025.
• 15% domestic minimum tax applying to fiscal years starting on or after 1 January 2024.

The announcement didn't include the Subject to Tax Rule, which is another element of the Pillar Two solution.

The following Bills were introduced into Parliament on 4 July 2024:

• Taxation (Multinational—Global and Domestic Minimum Tax) Bill 2024External Link
• Taxation External Link(Multinational—Global and Domestic Minimum Tax) Imposition Bill 2024External Link
• Treasury Laws Amendment (Multinational—Global and Domestic Minimum Tax) (Consequential) Bill 2024External Link

Although the rules will apply to in-scope MNE groups from 1 January 2024, the measure is not yet law in Australia.

In-scope multinational entities (MNE)

The global minimum tax and domestic minimum tax will:

• apply to large MNEs with annual global revenue of EUR750 million or more
• be based on the OECD Global Anti-Base Erosion (GloBE) Model Rules, which are designed to ensure MNEs pay an effective minimum level of tax on the income arising in each jurisdiction where they operate.

Global and domestic minimum tax

A global minimum corporate tax rate of 15% prevents a ‘race to the bottom’ on corporate tax rates and protects our corporate tax base. The global minimum tax rules would allow Australia to apply a top up tax on a resident multinational parent or subsidiary company where the group’s income is taxed below 15% overseas.

A domestic minimum tax would give Australia first claim on top-up tax for any low-taxed domestic income. In a small number of instances, a large multinational company’s effective Australian tax rate may fall below 15%. In these instances, the domestic minimum tax applies so that Australia collects the revenue that would otherwise have been collected by another country’s global minimum tax.

The ATO will develop systems to enable MNEs to lodge the GloBE Information Return (GIR) and pay any arising top-up tax liabilities payable in Australia to the ATO.

More information

• International community strikes a ground-breaking tax deal for the digital age – OECDExternal Link
• Global agreement on corporate taxation: addressing the tax challenges arising from the digitalisation of the economy | Treasury.gov.auExternal Link
• Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two) – OECDExternal Link
• Global and domestic minimum tax | Australian Taxation Office (ato.gov.au)
• Implementation of a global minimum and domestic minimum tax working group | ATO Software DevelopersExternal Link

You can direct questions about our administration of the global minimum tax and domestic minimum tax to Pillar2Project@ato.gov.au.