Tax consolidated group reporting for Pillar Two

GIR reporting simplifications

The aggregated reporting election (ARE) and transitional simplified reporting election (TSRE) are reporting simplifications that apply specifically to disclosures required under section 3.2.4 of the GloBE Information Return (GIR)External Link.

Broadly, section 3.2.4 of the GIR requires the multinational enterprise (MNE) group to report entity-level information supporting the effective tax rate (ETR) and top-up tax calculations. The ARE and TSRE allow this information to be provided on an aggregated basis where eligibility conditions are met:

• The ARE allows MNE groups to report information at the tax consolidated group level, effectively treating the group as a single constituent entity for reporting purposes.
• The TSRE allows MNE groups to report information at the jurisdictional level during a transitional period.

If neither election is made, the MNE group must provide top-up tax calculation information for each separate constituent entity in the MNE group.

Both elections are reporting simplifications and do not impact the actual calculations of top-up tax.

Both elections are available to the filing constituent entity. They are not mutually exclusive and can apply irrespective of the other.

OECD aggregated reporting election

The ARE allows MNE groups to elect to report GloBE computations for entities within a tax consolidated group as if they were a single constituent entity, rather than reporting information for each entity separately. This is outlined in note 3.2.4.b of the GIR explanatory guidanceExternal Link.

The election is made by completing relevant labels of the tax identification number (TIN) of the consolidated group and consolidating entities in section 3.2.4.b of the GIR, and the manner in which GloBE computations are disclosed in GIR.

For the Australian tax consolidation regime, the ARE is only available to TCGs and not MEC groups.

ARE eligibility criteria

The MNE group must meet all of the following conditions before the election can be made:

• the taxable profits and losses of the consolidated entities are aggregated for the purpose of computing a single tax liability
• all consolidated entities are wholly owned by the consolidating entity (the head company)
• all constituent entities or members of a deemed GloBE JV group within the tax consolidated group are GloBE located in the same jurisdiction
• an election to apply consolidated accounting treatment under section 3-200 of the Australian Minimum Tax Rules has been made.

ARE exclusions

There are a number of circumstances in which the election will not apply. The ARE is not available to:

1. MEC groups

The ARE is not available to MEC groups (as defined in section 719-5 of the Income Tax Assessment Act 1997) because they are not able to meet the condition that all consolidated entities must be wholly owned by the consolidating entity. The consolidating entity in a MEC group is the nominated provisional head company which does not wholly own other eligible tier-1 companies and their subsidiaries in the MEC group. MNE groups with MEC groups may still rely on the TSRE provided the eligibility conditions are met.

2. Entities entering or leaving the MNE group

The ARE is not available to entities that join or leave the MNE group during the reporting fiscal year, regardless of whether they were, or are, part of a TCG.

Any entity that joined or left the MNE group must have its information reported individually in the GIR in the fiscal year it joined or left. The ARE can still apply with respect to the other members of the TCG.

3. TCGs comprising of a mix of ordinary constituent entities and entities with separate ETR computations

The application of the ARE is limited with respect to TCGs comprising of a mix of ordinary constituent entities and entities that calculate their ETR separately to other constituent entities in the TCG. Such TCGs could include the following types of entities, which compute their ETR separately from other constituent entities:

• investment entities and insurance investment entities
• minority owned constituent entities.

Information about these entities must be disclosed on an entity-by-entity basis in the GIR, even if the entity is part of the TCG. The ARE can still apply to the other entities in the TCG that are subject to the ordinary ETR calculations. Where a TCG consists of only one type of entity that calculates their ETR separately (for example, where the TCG consists only of entities in a GloBE JV group), the ARE applies to all entities in the TCG as they share the same ETR calculation.

OECD transitional simplified reporting election

The transitional simplified jurisdictional reporting framework election (TSRE) allows MNE groups to report GloBE computations information for entities located in the same jurisdiction on an aggregated jurisdictional basis, rather than reporting information for each constituent entity separately. This is outlined in paragraph 8 of the Introduction and note 3.2.4.a.1 of the GIR explanatory guidanceExternal Link.

Where the election is made under section 3.2.4.a in the GIR, disclosures of certain adjustments to financial accounting net income or loss (FANIL), current tax expense or deferred tax expense can be reported at the jurisdictional level rather than reporting information for each entity separately.

Exceptions apply to certain disclosures discussed below, irrespective of whether the MNE group has elected to apply the TSRE.

This is a transitional election that only applies to fiscal years beginning on or before 31 December 2028 but not including any fiscal year that ends after 30 June 2030. Unlike the ARE, this election is not limited to TCGs and can be made for MEC groups.

The TSRE applies to all constituent entities located in the jurisdiction, including entities that calculate their ETR separately to ordinary constituent entities located in the same jurisdiction. The TRSE is not limited to tax consolidated groups.

Applying the TSRE does not mean that your obligations to calculate ETR on an entity-by-entity basis under the Australian Minimum Tax Rules is changed. It is a reporting simplification only.

Election eligibility criteria

Under the TSRE, the disclosures of all entities located in the same jurisdiction can be aggregated in the GIR if there is no need, for reporting purposes, for the jurisdictional top-up tax to be allocated across constituent entities in the jurisdiction. For this purpose, there is no need to report how jurisdictional top-up tax is allocated across entities located in the jurisdiction if the allocation does not impact the amount of any entity's liability under a qualified income inclusion rule (IIR) or qualified domestic minimum top-up tax (QDMTT), as applicable, for the relevant jurisdiction.

First, the MNE group will need to consider whether the QDMTT liability for entities in the jurisdiction depends on entity-by-entity allocation of jurisdictional top-up tax. Entity-by-entity allocation of jurisdictional top-up tax is not needed where a single entity is liable for any top-up tax under a QDMTT imposed in that jurisdiction.

For QDMTT purposes constituent entity-level reporting is still required if there is a need, for reporting purposes, for the jurisdictional top-up tax to be allocated to individual constituent entities.

If a QDMTT does not apply in that jurisdiction, then MNE groups will need to consider whether qualified IIR liabilities depend on entity-by-entity allocation of jurisdictional top-up tax. Entity by-entity allocation of jurisdictional top-up tax is not needed, for reporting purposes, in the following circumstances:

• A single parent entity applies a qualified IIR in respect of the jurisdiction and the parent entity's allocable share of the top-up tax of each constituent entity in the jurisdiction is 100%. (In this case, the parent entity's allocable share of the top-up tax of all entities will equal the jurisdictional top-up tax.)
• The inclusion ratio of all parent entities required to apply an IIR in respect of that jurisdiction is the same with respect to each relevant entity in the jurisdiction. (In this case, the jurisdictional top-up tax can be allocated equally to those parent entities.)

For IIR purposes, the MNE group must still provide reporting for each constituent entity if the above circumstances do not apply.

Another circumstance in which the TSRE is available is where no top-up tax arises for the jurisdiction under a qualified IIR or DMT.

For Australian tax consolidated groups, the TSRE may commonly (but not exhaustively) apply where there is:

• a DMT top-up tax liability in Australia and the only constituent entities of the MNE group located in Australia are members of an Australian tax consolidated group:
  • section 2-40 of the Australian Minimum Tax Rules allocates DMT top-up tax amounts of subsidiaries of Australian tax consolidated groups to the head company, so there is a single liable entity
  • for reporting purposes, there is no need to show the allocation of jurisdictional top-up tax to individual constituent entities located in Australia because the liability for that top-up tax could only ever be placed on the head company
• an Australian IIR top-up tax liability arising in respect of foreign low-taxed constituent entities, where the head company of an Australian tax consolidated group is the only parent entity that applies the IIR in respect of the foreign constituent entities, and the head company's allocable share of the top-up tax for each such entity is 100%. There is no QDMTT applicable in the jurisdiction of the foreign constituent entities:
  • since the head company's allocable share of the top-up tax for all low-taxed constituent entities located in the foreign jurisdiction is equal to the jurisdictional top-up tax, there is no need, for reporting purposes, to allocate the jurisdictional top-up tax among those constituent entities
  • the TSRE applies for the foreign jurisdiction's ETR computation disclosures in section 3.2.4.

For more information, see Pillar Two top-up tax for consolidated groups.

Disclosures in section 3.2.4 not covered by the TSRE

The explanatory guidance in the GIR lists a number of disclosures in section 3.2.4 that must be reported for each constituent entity irrespective of whether the MNE group has elected to apply the TSRE.

These disclosures relate to various items relevant to determining GloBE income or loss and adjusted covered taxes. They include adjustments made in applying the arm’s length principle and when entities join or leave an MNE group. Included in the list are also disclosures about entity-specific elections.

For more information, refer to note 3.2.4.a.1 of the GIR explanatory guidanceExternal Link.

Application of the elections

The ARE and TSRE are not mutually exclusive, and each can apply in addition to the other, provided the eligibility conditions are met. This means that where you are not eligible for the ARE, or only eligible in part, you may still be able to apply the TSRE and report data in the GIR on a jurisdictional basis. Similarly, where you are not eligible for the TSRE, you may still be able to apply the ARE and report the information relating to a TCG on an aggregated basis.

The following table outlines some common scenarios that illustrate the availability of the ARE and TSRE for constituent entities located in Australia. All scenarios assume that:

• there is an MNE group with DMT top-up tax in Australia
• where the ARE is available, all eligibility requirements (for example, the requirement to elect into consolidated accounting treatment) are satisfied.

Application of the ARE and TSRE

Scenario	ARE available? Yes or No	TSRE available? Yes or No
1. Joining entity: The only constituent entities of the MNE group located in Australia are the entities in a TCG. An entity joins the MNE group and TCG part way through the fiscal year.	No, for the joining entity. Yes, for the other members of the TCG.	Yes, as the head company of the TCG is the single liable entity for the DMT top-up tax. For reporting purposes, there is no need to allocate the jurisdictional top-up tax to constituent entities.
2. Leaving entity: The only constituent entities of the MNE group located in Australia are the entities in a TCG. A subsidiary member of the TCG leaves the TCG and MNE group part way through the fiscal year.	No, for the leaving entity. Yes, for the other members of the TCG.	Yes, as the head company of the TCG is the single liable entity for the DMT top-up tax. For reporting purposes, there is no need to allocate the jurisdictional top-up tax to constituent entities.
3. Investment entity head company: The only constituent entities of the MNE group located in Australia are the entities in a TCG. The TCG consists of an investment entity as head company and two ordinary constituent entities as subsidiary members. The investment entity is not an excluded entity under section 20 of the Taxation (Multinational - Global and Domestic Minimum Tax) Act 2024.	No, for the investment entity. Yes, for the ordinary constituent entities.	Yes, as the head company of the TCG is the single liable entity for the DMT top-up tax. For reporting purposes, there is no need to allocate the jurisdictional top-up tax to constituent entities.
4. Ordinary constituent entity head company: The only constituent entities of the MNE group located in Australia are the entities in a TCG. The TCG consists of an ordinary constituent entity as head company and 2 subsidiaries, one of which is an ordinary constituent entity and the other which is an insurance investment entity.	No, for the insurance investment entity. Yes, for the head company and the subsidiary that is an ordinary constituent entity.	Yes, as the head company of the TCG is the single liable entity for the DMT top-up tax. For reporting purposes, there is no need to allocate the jurisdictional top-up tax to constituent entities.
5. GloBE JV entities as head company and subsidiaries: The only entities of the MNE group located in Australia are the entities in a TCG. The head company and subsidiaries are all GloBE JV entities.	Yes, for all members of the TCG as all members share the same ETR computation.	Yes, as the head company of the TCG is the single liable entity for the DMT top-up tax. For reporting purposes, there is no need to allocate the jurisdictional top-up tax to GloBE JV entities.
6. TCG and standalone constituent entity: The MNE group has a TCG in Australia consisting of ordinary constituent entities. The MNE group also has a constituent entity located in Australia that is not a member of the TCG.	Yes, for the constituent entities that are members of the TCG as all members share the same ETR computation.	No, as the DMT top-up tax of the constituent entity outside the TCG is not allocated to the head company of the TCG. There is more than one constituent entity that could be liable for DMT top-up tax.
7. MEC group only: The MNE group has a MEC group in Australia consisting of ordinary constituent entities. It has no other constituent entities in Australia.	No, as the ARE does not apply to MEC groups.	Yes, as the provisional head company of the MEC group is the single liable entity for the DMT top-up tax. For reporting purposes, there is no need to allocate the jurisdictional top-up tax to constituent entities.
8. MEC group and standalone constituent entity: The MNE group has a MEC group in Australia consisting of ordinary constituent entities. The MNE group also has a constituent entity located in Australia that is not a member of the MEC group.	No, as the ARE does not apply to MEC groups.	No, as the DMT top-up tax of the constituent entity outside the MEC group is not allocated to the provisional head company of the MEC group. There is more than one constituent entity that could be liable for DMT top-up tax.
9. After TSRE transition period ends: The only constituent entities of the MNE group located in Australia are the entities in a TCG. The MNE group is lodging for the fiscal year ending 30 June 2032.	Yes.	No, as the transition period during which the TSRE applies has ended.

Where no top-up tax arises in Australia, the eligibility criteria for the TSRE would be met and the TSRE would be available in all of the above scenarios except for the final scenario.