Implementation of a global minimum tax and a domestic minimum tax
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.
This measure is not yet law.
Proposed changes include a:
- 15% global minimum tax for large multinational enterprises with the
- Income Inclusion Rule applying to income years starting on or after 1 January 2024, and
- Undertaxed Profits Rule applying to income years starting on or after 1 January 2025.
- 15% global domestic minimum tax applying to income years starting on or after 1 January 2024.
The global minimum tax and domestic minimum tax will be based on the OECD Global Anti-Base Erosion Model Rules, which are designed to ensure large multinationals pay an effective minimum level of tax on the income arising in each jurisdiction where they operate.
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 global minimum tax and domestic minimum tax will apply to large multinationals with annual global revenue of EUR750 million (approximately $1.2 billion) or more.
Multinationals with Australian headquarters will be able to lodge the GloBE Information Return (to be developed at the OECD level) and pay any arising top-up tax liabilities payable in Australia to the ATO.
You can direct questions about our administration of the global minimum tax and domestic minimum tax to Pillar2Project@ato.gov.au.
More information
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.