Global and domestic minimum tax

Global Anti-Base Erosion Model Rules

The Global Anti-Base Erosion Model RulesExternal Link (GloBE Rules) are a key element of the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework's Two-Pillar SolutionExternal Link to address the tax challenges arising from the digitalisation of the economy. The rules aim to set a minimum on tax rates to discourage large multinational enterprise groups (MNE Groups) from moving their profits to countries where they pay less tax.

The GloBE Rules:

provide for a co-ordinated system of taxation intended to ensure large MNE Groups are subject to a global minimum tax rate of 15% in each of the jurisdictions where they operate
are model rules developed by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting to inform the design of domestic legislation
consist of 2 interlocking rules
- The Income Inclusion Rule (IIR) – acts as the primary rule which allows jurisdictions to apply a top-up tax on multinational parent entities located in a jurisdiction if the group's effective tax rate in another jurisdiction is below 15%
- The Undertaxed Profits Rule (UTPR) – acts as a backstop rule which allows jurisdictions to apply a top-up tax on constituent entities located in a jurisdiction if the group's effective tax rate in another jurisdiction is below 15% and where the profit is not brought into charge under an IIR.
provide the option for jurisdictions to implement a domestic minimum tax, giving a jurisdiction the option to claim primary rights to impose top-up tax over any low-taxed profits in that jurisdiction in priority over the IIR and UTPR.

Pillar Two implementation in Australia

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 the digitalisation of the economy. The government has proposed changes to implement a global minimum tax and a domestic minimum tax.

Status of ATO implementation

Although the measure is not yet law, we are taking steps to progress this before it becomes law. This includes designing domestic returns and developing the systems required to administer the measure in advance of the first lodgments, due by 30 June 2026.

We've also conducted early public consultation to:

provide preliminary education and awareness about the Budget announced Pillar Two GloBE measures
seek feedback on administrative, compliance and systems' impacts associated with the implementation of the new global and domestic minimum tax.

From 1 February 2024, we have held a total of 25 consultation meetings with MNE Groups, industry groups, advisers and digital service providers (DSPs).

Consultations with DSPs are continuing and we are currently considering future ATO-led consultations.

Key consultation feedback and findings

The overarching theme from consultations so far includes the:

varying degrees of readiness for when the rules start
significant compliance challenges the GloBE Rules pose
potential technical difficulties in capturing the data points the GloBE Information Return (GIR) requires.

Capturing data points for the GIR

The feedback received so far indicates that for many MNE Groups:

the data points needed for the GIR are extensive and may require system changes or manual interventions
given the system updates needed, one key challenge for businesses is the amount of time and resources required to set up their systems to meet their obligations.

Australian specific administration and interpretation issues

Stakeholders raised a variety of topics about our administration and interpretation of the GloBE Rules, when enacted, including:

potential application of administrative penalties
safe harbours, with several consultees indicated there will likely be significant reliance on safe harbours, developed by the OECD/G20 Inclusive Framework on BEPS
interpretation questions relating to potential Australian income tax regime interactions.

In some instances, there was a misconception we will be able to provide further concessions and simplifications beyond the OECD/G20’s GloBE Rules to reduce compliance costs. It was communicated to consultees that, to ensure qualified status, we are unable to provide administrative concessions or simplifications that are inconsistent with those provided for in the OECD/G20's GloBE Rules, Commentary and Administrative Guidance.

With the release of the draft legislation, we propose to carry out further public consultation in due course. Several consultees indicated they were seeking to review the legislation and Explanatory Memorandum before identifying potential topics in respect of our administration and technical interpretation.

Support from advisers

Several advisers:

have built internal capability for this new measure
are advising clients in advance of
- the start date of impact assessments
- understanding data needs for the GIR.

Even though there are certain third-party tools on the market to assist with core and safe harbour calculations, select large advisory firms are developing their own in-house modelling tools to gather data points and establish a rules database.

Support and assistance to comply with the new rules

We will likely need to assist in-scope MNEs with meeting future obligations, including:

guidance on our client engagement approach and Australian specific administration and interpretation issues
application and administration of any associated penalties
a dedicated contact to assist with queries.

Contact us about Pillar Two

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

Primary legislation

The following information is based on the primary legislation introduced to parliament. The aim is to provide information on the key features of the new measure.

The Australian Parliament will consider the primary legislation and may propose changes. We administer the laws as enacted by the parliament.

The majority of the GloBE rules will be contained in subordinate legislationExternal Link, to be made after enactment of the primary legislation.

For the primary legislation introduced to parliament, see:

When and who the GloBE rules apply to

Dates when the rules apply

It is expected that:

IIR and the domestic minimum tax will apply to fiscal years starting on or after 1 January 2024.
UTPR will apply to fiscal years starting on or after 1 January 2025.

Who the rules apply to

The global minimum tax under the GloBE Rules applies to constituent entities that are members of MNE Groups which have annual revenue exceeding 750 million Euros in the consolidated financial statements of the ultimate parent entity (UPE).

Broadly, constituent entities are entities of MNE Groups which are not classified as excluded entities under the GloBE Rules. An MNE Group is a group, in most cases determined under accounting consolidation principles, for which there is at least one entity or permanent establishment in a jurisdiction that is not the jurisdiction of the UPE.

If the UPE's annual revenue in at least 2 of the 4 fiscal years preceding the test year meet or exceed the threshold, then the MNE Group is in-scope.

The domestic minimum tax broadly applies to Australian constituent entities in MNE Groups to which the GloBE rules apply to.

Excluded entities

Certain entities of an MNE Group are excluded from the operation of the GloBE Rules (known as excluded entities).

Examples of excluded entities include government entities, international organisations, non-profit organisations and pension funds, as well as UPEs which are either an investment fund or a real estate investment fund. The definitions for excluded entities in the primary legislation are based on the GloBE Rules.

We are currently considering the ATO and Treasury consultation feedback received to date about requests for further clarity on the various excluded entity definitions, and the need for ATO guidance on this subject will be explored in future consultation.

OECD safe harbours

What safe harbours are available under the OECD model rules

Broadly, there are 4 safe harbours available.

Transitional country-by-country (CBC) reporting safe harbour

The transitional CBC reporting safe harbour allows an MNE to use existing CBC reporting and financial accounting data as the basis for the safe harbour calculation, eliminating the need to undertake detailed GloBE calculations.

This safe harbour applies to fiscal years beginning on or before 31 December 2026 but not including a fiscal year that ends after 30 June 2028. An MNE may elect to use the safe harbour if it can demonstrate, based on their Qualified CBC Reports and Qualified Financial Statements, that it meets either the:

de minimis test
simplified effective tax rate test or
routine profits test.

The effect of applying this safe harbour is that the jurisdictional top-up tax is taken to be zero.

Qualified Domestic Minimum Top-Up Tax (QDMTT) safe harbour

An MNE Group may elect to apply the permanent QDMTT safe harbour. The permanent QDMTT safe harbour reduces the top-up tax of a jurisdiction to zero. This is for the purpose of applying an IIR or UTPR to the jurisdiction, where that jurisdiction applies a QDMTT that has QDMTT safe harbour status. This provides a practical compliance solution to avoid needing to carry out both QDMTT and GloBE calculations in respect of a jurisdiction.

Non-Material Constituent Entity (NMCE) simplified calculations safe harbour

MNE Groups may elect to use the NMCE simplified calculations safe harbour, which includes a simplified method in determining the GloBE income or loss, GloBE revenue and adjusted covered taxes of a NMCE.

This permanent safe harbour allows MNE Groups to use these simplified calculations for NMCEs in determining whether the de minimis test, routine profits test or effective tax rate test has been met for a jurisdiction under the safe harbour.

Broadly, an NMCE is a constituent entity that has not been consolidated in the UPE's consolidated financial statements solely due to size or materiality.

Where an MNE Group meets one of the simplified calculations safe harbour tests, the top-up tax for the jurisdiction is taken to be zero, with some limited exceptions.

Transitional UTPR safe harbour

The transitional UTPR safe harbour allows an MNE to reduce their UTPR top-up tax amount for the UTPR jurisdiction (only) to nil during the transitional period, if the UPE jurisdiction has a nominal corporate income tax rate of at least 20%. This safe harbour applies to fiscal years beginning on or before 31 December 2025 and ending before 31 December 2026.

The consolidated commentaryExternal Link provides further information on the safe harbours available and applicable tests where relevant. For details, download the OECD Commentary to the GloBE Rules and refer to Annex A – Safe Harbours: Global Anti-Base Erosion Rules (Pillar Two).

Additional simplifications

To ensure qualification of Australia's IIR/UTPR and domestic minimum tax, we are unable to provide concessions, simplifications or safe harbours that are inconsistent with the outcomes provided for in the OECD model rules and Administrative Guidance.

Lodgment obligations

Lodgment forms

It is expected that 4 new obligations will be introduced which entities may be required to lodge:

GloBE Information Return (GIR)
Foreign lodgment notification
Australian IIR/UTPR Tax Return (AIUTR)
Domestic Minimum Tax Return (DMTR).

We are currently developing forms for the foreign lodgment notification, the AIUTR and the DMTR. It is expected that these forms will be subject to future consultation and will be available to taxpayers in advance of the first lodgments, due by 30 June 2026.

GIR and foreign lodgment notification

The GIR is an information return containing data to enable tax administrators to assess an MNE's compliance with the GloBE Rules.

Under the primary legislation, each Australian group entity in a MNE Group is required to lodge a GIR by default. Consistent with the GloBE Rules, the primary legislation provides the ability for the group entity to nominate another entity in the MNE Group to lodge the GIR on their behalf. This comprises a designated local entity lodging to the ATO or a foreign entity lodging the GIR to a foreign government agency.

A group entity is required to lodge a foreign lodgment notification, which we are currently developing, where they have nominated a foreign entity to lodge the GIR on their behalf to a foreign government agency.

AIUTR and DMTR

The AIUTR and DMTR are Australian domestic tax returns, which are currently developing to enable the triggering of Australia's domestic assessment and pay provisions, as the GIR is an information only return.

The AIUTR is for the global minimum tax, while the DMTR is for the domestic minimum tax.

Under the primary legislation, each Australian group entity:

is required to lodge an AIUTR where they have an Australian IIR/UTPR tax amount (including a nil amount)
in an MNE Group is required to lodge a DMTR where they have an Australian domestic minimum tax amount (including a nil amount).

Entities have the option to nominate the designated local entity to file on their behalf. The constituent entity’s lodgment obligation will be fulfilled where the designated local entity lodges by the respective lodgment due date.

Note: Excluded entities don't have an obligation to lodge the AUITR or DMTR, nor do they have an obligation to lodge the GIR and foreign lodgment notification form.

Lodgment due dates

The GIR, where the GIR is being lodged in Australia, foreign notification form, AIUTR and DMTR are required to be lodged 18 months after the end of the first fiscal year and 15 months after the end of the subsequent fiscal years.

Under the primary legislation we will have the ability to extend the lodgment deadline for the AIUTR and DMTR, but not the GIR or the foreign notification form.

Lodgment due dates for the first fiscal year
Year-end date	Lodgment due date
Fiscal years ending before 31 December 2024 (fiscal years less than 12 months)	30 June 2026
31 December 2024	30 June 2026
31 January 2025	31 July 2026
28 February 2025	31 August 2026
31 March 2025	30 September 2026
30 April 2025	31 October 2026
31 May 2025	30 November 2026
30 June 2025	31 December 2026
31 July 2025	31 January 2027
31 August 2025	28 February 2027
30 September 2025	31 March 2027
31 October 2025	30 April 2027
30 November 2025	31 May 2027

Record keeping

Keeping records on global and domestic minimum tax

The draft legislation inserts a new provision in the Taxation Administration Act 1953 which provides record keeping requirements on the global and domestic minimum tax.

Broadly, the provision requires a group entity, as well as joint ventures and joint venture subsidiaries, to keep records that fully explain whether it has complied with the global and domestic minimum tax legislation. This includes, but is not limited to, all records that explain and show the basis of every disclosure in the GIR lodged or exchanged with the Commissioner.

Records must be kept in writing in English, or in a format that is readily accessible and convertible to English and must enable the entity’s liability to top-up tax to be readily determined.

Excluded entities, which may not have an obligation to lodge, are still required to keep records relating to their status as an excluded entity.

Records must be kept until either:

the end of 8 years after those records were prepared or obtained
8 years after the completion of the transactions or acts to which those records relate
the end of the period of review for an assessment to which those records relate (if extended), whichever is the later.

Penalties

What administrative penalties can apply

The existing uniform penalty provisions contained in Schedule 1 of the Taxation Administration Act 1953 apply, with base penalty amounts similar to those imposed for significant global entities. This means, for example:

penalties for failure to lodge on time, which can apply to entities that do not lodge an approved form by the due date. The base penalty amount is multiplied by 500.
penalties for false and misleading statements or for taking a position that is not reasonably arguable. The base penalty amount is multiplied by 2 times the base penalty amount.

In addition, an administrative penalty can apply for failing to keep records about the minimum tax law.

OECD guidance on penalties

The OECD has released guidance on transitional penalty relief, which outlines that administrators should consider providing a soft landing for MNE Groups during a transition period.

This includes recommending administrators consider not applying penalties or sanctions in connection with the filing of the GIR during the transition period where an MNE group has taken 'reasonable measures' to ensure the correct application of the GloBE Rules. 'Reasonable measures' is not defined and should be understood in light of each jurisdiction's existing rules and practices.

ATO guidance on penalties

We are currently considering consultation feedback received to date about the application of penalties to the global and domestic minimum tax. The need for updated guidance will be explored in future consultation.

Guidance

ATO guidance

We are currently considering the need for guidance products to support the new measure, along with whether there is a need to update existing guidance.

As part of future consultation, we will seek feedback on guidance that will most usefully support implementation of the new measure.

Private ruling applications

Under the primary legislation, taxpayers can apply for a private ruling involving the application of a relevant provision of a tax law relating to the global and domestic minimum tax.

However, we can't consider private ruling applications until the law is enacted. This means we can't consider private ruling applications on issues relating to the primary legislation or subordinate legislation until such legislation comes into force.

The primary legislation also introduces new circumstances in which the Commissioner may decline to provide a ruling in respect of the global or domestic minimum tax.

The explanatory memorandum provides some examples of situations where the Commissioner may determine it is unreasonable to provide a private ruling, including where:

the OECD Inclusive Framework has published new Administrative Guidance which Australia is planning on incorporating into domestic law but has not yet done so, or
the OECD Inclusive Framework has identified an issue which requires Administrative Guidance, or is drafting Administrative Guidance on a global or domestic minimum tax issue, and has yet to publish an agreed version of that Administrative Guidance, or
issuing a ruling would require assumptions to be made on how other jurisdictions apply their respective domestic rules relating to the global or domestic minimum tax.

To provide effective public advice and guidance at the right time, we are interested in understanding what issues taxpayers are likely to seek a private ruling on. Feedback can be provided to the Pillars mailbox at, Pillar2Project@ato.gov.au. We will also look to seek feedback on this topic in our future consultations.

OECD guidance materials

OECD guidance materials are intended to promote a consistent and common interpretation of the GloBE Rules to provide certainty for MNE Groups and to facilitate coordinated outcomes under the rules.

OECD guidance materials released to date include:

More information

For more information, see: