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. These changes mark a pivotal step in ensuring that multinational enterprise (MNE) groups pay the right amount of tax in Australia. This measure is now law.
The primary legislation – Taxation (Multinational—Global and Domestic Minimum Tax) Act 2024External Link, Taxation (Multinational—Global and Domestic Minimum Tax) Imposition Act 2024External Link and Treasury Laws Amendment (Multinational—Global and Domestic Minimum Tax) (Consequential) Act 2024External Link – are now law. The subordinate legislation – Federal Register of Legislation – Taxation (Multinational—Global and Domestic Minimum Tax) Rules 2024External Link – is also now law. The legislation includes a:
- 15% global minimum tax for large MNEs with the
- Income Inclusion Rule applying to fiscal years starting on or after 1 January 2024
- 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.
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 is developing 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.
Global anti-base erosion rules (Pillar Two) side-by-side package implementation
On 12 May 2026, as part of the 2026–27 Federal BudgetExternal Link , the Government announced that it will implement the side-by-side packageExternal Link that was agreed by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting. The package contains a number of simplifications and safe harbours to ensure the continued coordinated operation of the global minimum tax.
A key component of the package is the side-by-side safe harbour, which applies to fiscal years commencing on or after 1 January 2026. Under the side-by-side safe harbour, the profits of MNE groups headquartered in qualifying side-by-side jurisdictions will not be in scope of Australia’s global minimum tax. Australia’s domestic minimum tax will continue to apply for all fiscal years. The side-by-side safe harbour:
- will not change the Australian lodgment requirements for fiscal years that commenced in 2024 or 2025
- only impacts lodgment and payment obligations for fiscal years commencing from 1 January 2026 (generally due from March 2028).
More information
- Global and domestic minimum tax
- Federal Register of Legislation – Taxation (Multinational—Global and Domestic Minimum Tax) Rules 2024External Link
- Implementation of a global minimum and domestic minimum tax working groupExternal Link
- 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 economyExternal Link
- Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two) – OECDExternal Link
You can direct questions about our administration of the global minimum tax and domestic minimum tax to Pillar2Project@ato.gov.au.