Lodgments for tax consolidated groups
The Australian global and domestic minimum tax introduces 4 new lodgment obligations:
- GloBE Information Return (GIR)
- Foreign lodgment notification
- Australian IIR/UTPR Tax Return (AIUTR)
- Australian DMT Tax Return (DMTR).
Each group entity located in Australia has an obligation to lodge either a GIR or foreign lodgment notification (where the GIR is lodged overseas). This includes subsidiary members of a tax consolidated group.
Each group entity must also lodge an AIUTR or DMTR, unless their circumstances qualify for a lodgment exemption. Under the draft legislative instrument, subsidiary members of a tax consolidated group may be exempt from lodging the AIUTR or the DMTR, or both the AIUTR and DMTR, depending on their circumstances.
Nominated entity
Multinational enterprise groups (MNE groups) can appoint a nominated entity to lodge on behalf of each entity that has a lodgment obligation:
- A designated local entity (DLE) can be appointed to lodge the GIR (if lodged in Australia) or foreign lodgment notification (where the GIR is lodged overseas), the AIUTR and DMTR.
- A designated filing entity (DFE) or ultimate parent entity (UPE) in a foreign jurisdiction can lodge the GIR in that jurisdiction.
The head company of a tax consolidated group can be appointed as the DLE, but it does not have to be. If an MNE group has Australian group entities outside of the tax consolidated group but within the same MNE group, they must also be included in the DLE nomination.
Lodgment for entities leaving and joining applicable MNE groups
If an entity leaves an applicable MNE group and joins another applicable MNE group part way through the fiscal year, the entity has separate lodgment obligations as a group entity of both MNE groups at different times during the fiscal year.
However, where the entity joins or leaves a tax consolidated group in either applicable MNE group it may be exempt from one or both of its DMTR and AIUTR lodgment obligations under the draft legislative instrument, as follows.
Top-up tax of tax consolidated group members
If a subsidiary member of a tax consolidated group has a DMTl or UTPR top-up tax amount, that amount is allocated to the constituent entity head company of the group, subject to certain exceptions.
This is provided under:
- section 2-40 of the Australian Minimum Tax Rules for a DMT top-up tax amount
- section 2-50 of the Australian Minimum Tax Rules for a UTPR top-up tax amount.
As a result, the top-up tax amounts for the subsidiary member are taken to be zero. Subject to finalisation of LI 2025/D17 draft legislative instrument, the subsidiary member will also be exempt from lodging the DMTR. It may also be exempt from lodging an AIUTR.
However, where the subsidiary member could have an IIR top-up tax amount greater than zero, it will still need to lodge an AIUTR, as IIR top-up tax amounts are not re-allocated to the head company. This situation can occur where the head company of the tax consolidated group is an excluded entity, or in certain MEC group structures where one or more eligible tier-1 companies other than the provisional head company could be allocated an IIR top-up tax amount greater than zero under the rule order.
For more information, see Pillar Two top-up tax for tax consolidated groups.
Legislative instrument
The draft legislative instrument sets out circumstances in which a group entity need not lodge a DMTR or AIUTR for a fiscal year. It contains specific exemptions for subsidiary members of a tax consolidated group from the requirement to lodge:
- an Australian DMTR, if the subsidiary member of the tax consolidated group is an entity to which subsection 2-40(2) of the Australian Minimum Tax Rules applies
- the AIUTR, if broadly, both the following circumstances apply:
- the subsidiary member cannot have an IIR top-up tax amount greater than zero, in the circumstances set out in paragraph 11(1)(a) of the draft legislative instrument
- the subsidiary member is an entity to which subsection 2-50(2) of the Australian Minimum Tax Rules applies, or another circumstance under paragraph 11(1)(b) of the draft legislative instrument applies.
The relevant entities that can have IIR top-up tax amounts greater than zero are, broadly, parent entities:
- that are GloBE located in Australia
- that hold ownership interests in entities located outside Australia, including stateless entities
- for which no other higher-tier parent entity in Australia or overseas is required to apply a qualified IIR under the rule order.
As a result, generally only the head companies of consolidated groups (TCGs) and multiple entry consolidated (MEC) groups, and other eligible tier-1 companies of MEC groups, may have IIR top-up tax amounts greater than zero. A corresponding AIUTR lodgment obligation applies to those entities.
These lodgment exemptions may also apply to subsidiary members of a tax consolidated group that leave or join the tax consolidated group part way through a fiscal year.
GloBE Information Return and foreign lodgment notification
The draft legislative instrument does not exempt group entities from lodgment of the GloBE Information Return (GIR) or foreign lodgment notification (where the GIR is lodged overseas). As such, the obligation to lodge the GIR or foreign lodgment notification, as applicable, remains with all Australian members of the MNE group.
This means the head company and subsidiary members of a tax consolidated group have separate obligations to lodge the GIR or foreign lodgment notification. However, an MNE group can choose to lodge the GIR or the foreign lodgment notification centrally by nominating a single entity (the designated local entity) to lodge on behalf of Australian group entities.
Example scenarios
The following examples illustrate how Pillar Two lodgment obligations apply to tax consolidated groups, in certain scenarios.
As the legislative instrument is in draft and has no legal effect, the following examples demonstrate how we expect the instrument to operate, if finalised and registered, and subject to parliamentary processes.
Example 1: joining a TCG
Alpha Co joins an applicable Australian headquartered MNE group, Omega Group, on 1 August 2025. At the same time, it also becomes a subsidiary member of a TCG, with Omega Co as head company. It was not a member of another applicable MNE group before joining Omega Group.
Omega Group’s fiscal year ends on 31 December 2025. Sections 2-40 and 2-50 of the Australian Minimum Tax Rules apply respectively to reduce Alpha Co’s DMT top-up tax amount and UTPR top-up tax amount for the fiscal year ended 31 December 2025 to nil. They reallocate this top-up tax to the head company of the TCG, Omega Co.
Under the draft legislative instrument, Alpha Co will be exempt from lodging the DMTR for the fiscal year ended 31 December 2025. As Alpha Co meets all the relevant criteria in the instrument, it is also exempt from having to lodge the AIUTR. The obligation to lodge these tax returns will continue to exist for the head company of the TCG. Alpha Co still has to lodge a GIR but, this obligation will be met if a DLE lodges the GIR with the ATO on its behalf.
End of example
Example 2: leaving a TCG and joining another TCG
Beta Co is a wholly owned Australian group entity of the applicable Australian headquartered MNE group, Gamma Group. Beta Co is also a subsidiary member of a TCG, with Gamma Co as the head company. Halfway through the fiscal year, Beta Co is acquired by another applicable Australian headquartered MNE group, Zeta Group. On completion of this transaction, Beta Co immediately joins a TCG in Zeta Group. Gamma Group and Zeta Group both have fiscal years ending 31 December.
Sections 2-40 and 2-50 of the Australian Minimum Tax Rules apply respectively to reduce Beta Co’s DMT and UTPR top-up tax amounts to nil. These DMT and UTPR top-up tax amounts are re-allocated to the head companies of the respective TCGs. Each head company is effectively reallocated the DMT and UTPR top-up tax amounts of Beta Co that arise for the period of the fiscal year that Beta Co was a member of their applicable MNE group.
Each head company will be required to lodge a DMTR for their respective fiscal year ended 31 December. Those head companies will also need to lodge an AIUTR, unless they qualify for a lodgment exemption. Their returns can be lodged through a DLE of the respective MNE group.
Beta Co is prima facie required to lodge a DMTR, AIUTR and GIR in its capacity as group member of Gamma Group and another DMTR, AIUTR and GIR in its capacity as group member of Zeta Group.
However, under the draft legislative instrument, Beta Co will be exempt from lodging a DMTR in respect of both groups, due to it having been a subsidiary member of a TCG in those groups during the fiscal year. Further, as Beta Co meets all the relevant criteria in the instrument, it will also be exempt from having to lodge an AIUTR in each of these capacities.
Beta Co still has to lodge the GIR in its capacity as a group entity of Gamma Group and in its capacity as a group entity of Zeta Group. However, this obligation will be met with respect to both MNE groups if a DLE of each group lodges the GIR with the ATO on its behalf. Practically, this means the DLE may lodge the combined return as well as the GIR on behalf of the Australian group entities.
End of example
Example 3: different fiscal years – leaving a TCG group
Sigma Co is a wholly owned Australian subsidiary of the applicable Australian headquartered MNE group, Theta Group. Sigma Co is also a subsidiary member of a TCG, with Theta Co as head company. Theta Group has a fiscal year ended 31 December.
On 30 June 2025, 100% of the ownership interests in Sigma Co are acquired by another applicable MNE group, Iota Group (fiscal year ended 31 March). However, Sigma Co does not join a TCG in Iota Group.
Sigma Co’s DMT and UTPR top-up tax amounts that arise in respect of Theta Group are reduced to nil under sections 2-40 and 2-50 of the Australian Minimum Tax Rules. This top-up tax is reallocated to the head company of the TCG in Theta Group. Under the draft legislative instrument, Sigma Co will be exempt from lodging a DMTR and AIUTR, in respect of its capacity as group entity of Theta Group, for the fiscal year ended 31 December 2025. The obligation to lodge a DMTR and AIUTR continues to exist for the head company of the TCG in Theta Group. This may be met if an appointed DLE has centrally lodged the AIUTR and DMTR for all Australian group entities of Theta Group on their behalf.
Sigma Co is not exempt from lodgment of the DMTR in its capacity as group member of Iota Group for the fiscal year ended 31 March 2026. In this capacity, Sigma Co is also not exempt from lodgment of the AIUTR as it is not a subsidiary member of a TCG and none of the other exemption criteria in the instrument apply. Sigma Co's obligations to lodge the AIUTR and DMTR as a group entity of lota Group will be met if an appointed DLE has centrally lodged the AIUTR and DMTR for all Australian group entities of lota Group.
Sigma Co still has to lodge the GIR in respect of each MNE group for the fiscal years ended 31 December 2025 and 31 March 2026 respectively. However, this obligation will be met if, for each MNE group, a DLE lodges the GIR with the ATO on its behalf. Practically, this means the DLE may lodge the combined return as well as the GIR on behalf of the Australian group entities.
End of example
Example 4: partial sale of a subsidiary
Delta Co is a wholly owned group entity of the applicable MNE group, Kappa Group. The UPE of Kappa Group, Kappa Co, is located in Australia and has a fiscal year ending 31 December. Delta Co is a subsidiary member of a TCG. On 30 June 2025, 20% of Delta Co is purchased by Rho Co, who are not a group entity of Kappa Group. As a result, Delta Co leaves the TCG, but 80% of its ownership remains held within the Kappa Group and it remains a group entity.
Delta Co’s DMT top-up tax amount and UTPR top-up tax amount for the fiscal year ending 31 December 2025 are reduced to nil in accordance with sections 2-40 and 2-50 of the Australian Minimum Tax Rules. These top-up tax amounts are allocated to B Co, the head company of the TCG.
Under the draft legislative instrument, Delta Co would be exempt from lodging the DMTR and the AIUTR in respect of the fiscal year ended 31 December 2025. The obligation to lodge a DMTR and AIUTR continues to exist for B Co, as the head company of the TCG.
Delta Co still has to lodge the GIR for the fiscal year, but this obligation will be met if a DLE lodges the GIR with the ATO on its behalf. Practically, this means the DLE may lodge the combined return as well as the GIR on behalf of the Australian group entities.
End of example
Example 5: partially owned to wholly owned subsidiary
An applicable MNE group, Zeta Group, owns 80% of group entity Epsilon Co. The remainder of the ownership interests in Epsilon Co are held by an entity that is not a group entity of Zeta Group. The UPE of Zeta Group, Zeta Co, is located in Australia and has a fiscal year ending 31 December. On 1 April 2025, Zeta Group acquires the remaining 20% of Epsilon Co from Eta Co and Epsilon Co joins a TCG.
Epsilon Co’s DMT and UTPR top-up tax for the fiscal year ended 31 December 2025 is reduced to nil in accordance with sections 2-40 and 2-50 of the Australian Minimum Tax Rules. This top-up tax is entirely allocated to the head company of the TCG. Under the draft legislative instrument, Epsilon Co will be exempt from lodging the DMTR in respect of the fiscal year. As it meets all the relevant criteria in the instrument, it will also be exempt from lodging of the AIUTR.
End of example