Explanatory Statement

Issued by authority of the Assistant Minister for Productivity, Competition, Charities and Treasury and Parliamentary Secretary to the Treasurer

Taxation (Multinational - Global and Domestic Minimum Tax) Amendment (2026 Measures No.1) Rules 2026

Taxation (Multinational - Global and Domestic Minimum Tax) Act 2024

Section 29 of the Taxation (Multinational—Global and Domestic Minimum Tax) Act 2024 (the Assessment Act) provides that the Minister may make Rules required or permitted by the Assessment Act, or necessary or convenient for carrying out or giving effect to the Assessment Act.

The purpose of the Taxation (Multinational—Global and Domestic Minimum Tax) Amendment (2026 Measures No.1) Rules 2026 (the Amending Rules) is to make administrative amendments to ensure the effective operation of the Domestic Top-up Tax under Chapter 2 of the Taxation (Multinational—Global and Domestic Minimum Tax) Rules 2024 (the Rules).

The Rules were substantively enacted at the end of 2024 to implement the domestic framework for a multinational top-up tax, by providing the computations of top-up tax as detailed under the OECD GloBE Model Rules (as modified by the Commentary, Agreed Administrative Guidance and Safe Harbours Rules) (GloBE Rules). The Amending Rules aim to ensure that administrative guidance released by the OECD is incorporated appropriately. It is imperative that the Rules reflect OECD approved documents so that Australia's implementation of the GloBE Rules achieves qualified status, which can only be achieved if the Rules are implemented in a manner consistent with the GloBE Rules. All OECD documents are publicly available from the OECD website and could be, in 2025 accessed freely from https://oecd.org.

The Assessment Act does not specify any conditions that need to be satisfied before the power to make the Rules may be exercised.

The Amending Rules were publicly consulted on for a period of 4 weeks from 16 February 2026 to 13 March 2026, and no feedback was received. The ATO has general administration of the Pillar 2 legislation and has been heavily involved in developing the Amending Rules and their feedback on technical matters has been incorporated.

The Amending Rules are a legislative instrument for the purposes of the Legislation Act 2003. The Amending Rules are subject to disallowance and sunsetting in accordance with sections 42 and 50, respectively, of the Legislation Act 2003.

The Amending Rules commence the day after registration.

The Amending Rules apply from 1 January 2024.

The retrospective application is appropriate as it is consistent with the policy provided in the OECD's Two Pillar Solution and is expected as part of the coordinated international approach for jurisdictions implementing the GloBE Rules. Retrospective application also achieves a start date in line with that stipulated by the OECD's Two Pillar Solution and an expected collective group of jurisdictions implementing the GloBE Rules as part of the coordinated international approach. The Assessment Act provides that Rules may be made retrospectively despite subsection 12(2) of the Legislation Act 2003.

Details of the Rules are set out in Attachment A .

The Office of Impact (OIA) Analysis has been consulted. A list of reports certified as equivalent to a Policy Impact Analysis can be found at
https://oia.pmc.gov.au/published-impact-analyses-and-reports/two-pillar-solution-addressing-tax-challenges-arising. The full list of reports and executive summaries of those reports are also available in the Explanatory Memorandum for the Assessment Act as these reports have been certified for the Assessment Act and the Rules.

ATTACHMENT A

Details of the Taxation (Multinational—Global and Domestic Minimum Tax) Amendment (2026 Measures No. 1) Rules 2026

Section 1 – Name

This section provides that the name of the instrument is the Taxation (Multinational—Global and Domestic Minimum Tax) Amendment (2026 Measures No. 1) Rules 2026 (the Amending Rules).

Section 2 – Commencement

Schedule 1 to the Amending Rules commenced on the day after the instrument is registered on the Federal Register of Legislation.

Section 3 – Authority

The Amending Rules made under the Taxation (Multinational—Global and Domestic Minimum Tax) Act 2024 (the Assessment Act).

Section 4 – Schedule

This section provides that each instrument that is specified in the Schedules to this instrument are amended or repealed as set out in the applicable items in the Schedules, and any other item in the Schedules to this instrument has effect according to its terms.

Substantive amendments

The Amending Rules make the following changes to Domestic Minimum Tax provisions in Chapter 2 to ensure administrability in enacting Australia's Domestic Minimum Tax.

Domestic Top-up Tax for Stateless Entities

Minor amendments are made to section 2-25 and subsection 2-35(7) of the Rules to clarify the operation of Domestic Top-up Tax in respect of Stateless Entities. The amendments ensure the operation of Domestic Top-up Tax is limited to Stateless Constituent Entities to that are either Flow-through Entities that are created in Australia and that meet the definition under subsection 41(3) of the Assessment Act or which are stateless Permanent Establishments that meet the definition under section 19(1)(d) of the Assessment Act and which are a place of business in Australia.

Equivalent amendments are made for Joint Ventures to ensure that the Domestic Top-up Tax is appropriately collected from Stateless JVs and JV subsidiaries. Given that a JV Entity could be a Permanent Establishment or Flow-through Entity, subsection 41(3) and paragraph 19(1)(d) of the Assessment Act may operate to treat that JV Entity as a Stateless Constituent Entity. Subsection 41(2) may operate to treat a Flow-through Entity Joint Venture, that is an Ultimate Parent Entity (UPE) of a deemed separate MNE Group, as located in the jurisdiction of its creation.

Interaction with Australian consolidation

Section 2-40 of the Rules is amended to ensure it operates appropriately to allocate Domestic Top-up Tax Amounts from subsidiary members of Tax Consolidated Groups (TCG) to their head entities. The amendments clarify that section 2-40 of the Rules applies to JV Subsidiaries that are subsidiary members of a TCG or Multiple Entry Consolidated (MEC) Group in respect of which a JV or another JV subsidiary is the head company. Such a JV Subsidiary's Domestic Top-up Tax Amount is allocated to the head company, ensuring that the head company is responsible for Domestic Top-up Tax Amount liabilities, consistent with the treatment under Australian income tax legislation. The amendments also ensure that Domestic Top-up Tax Amount is not allocated to a head company that is an Excluded Entity or Securitisation Entity.

Allocation of taxes for computing Domestic Top-up Tax

Minor amendments are made to section 2-35(6) of the Rules to reflect paragraph 118.30 on page 296 of the 2025 Commentary to provide the outcome that covered taxes imposed on a Reverse Hybrid Entity or Hybrid Entity in Australia, will be allocated to that Entity for the purposes of computing a Domestic Top-up Tax Amount. That is, the policy outcome is that taxes imposed by Australia, as the jurisdiction of location or creation of the Reverse Hybrid or Hybrid Entity will be pushed down to that Entity if the taxes are recorded in the accounts of the Constituent Entity-Owner. Consistent with the underlying policy intent that GloBE income remains with these types of entities, corresponding taxes imposed by Australia on the Constituent Entity-owner are allocated to the same Entity for the purposes of computing Domestic Top-up Tax.

Interaction with Australian QDMTT SH

As a result of Australia being specified as having a Qualified DMT under section 6 of the Taxation (Multinational—Global and Domestic Minimum Tax) (Qualified GloBE Taxes) Determination 2025 (Ministerial Determination), it is arguable that Australia's own Jurisdictional Top-up Tax could be taken to be zero under section 8-200 of the Rules. A carve out is included to prevent this outcome and ensure that Domestic Top-up Tax under section 2-30 of the Rules can apply to Australia.

Foreign currency translation rule

Paragraph 17.3 on page 13 of the 2025 Commentary allows jurisdictions to adopt any reasonable basis for the translation of Top-up Tax liabilities into local currency, after Top-up Tax amounts have first been calculated in the reporting currency of the Consolidated Financial Statements of the UPE. Whilst not limiting a jurisdiction to any particular basis, the Commentary provides three options for jurisdictions to convert amounts of Top-up Tax to the relevant jurisdiction's currency, as a final step in determining the amount of Top-up Tax liability:

1.

the average foreign exchange rate for the Fiscal Year;

2.

the foreign exchange rate on the last day of the Fiscal Year; or

3.

the foreign exchange rate on the date payment is required.

Section 1-25 of the Rules is amended to reflect Australia's decision to choose option 2 and convert amounts of Top-up Tax calculated in a foreign currency to Australian dollars based on the foreign exchange rate on the last day of the Fiscal Year. This provides for the outcome that an IIR, UTPR or DMT Top-up Tax amount will be converted to Australian dollars, if otherwise determined in any other currency. It is up to the discretion of the Entity to determine the appropriate source for the exchange rate, provided that the sources are either from a central bank or publicly and commercially available. For example, the exchange rate could be sourced from a national central bank of a jurisdiction, or from a commercial source.

ATTACHMENT B

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Taxation (Multinational—Global and Domestic Minimum Tax) Amendment (2026 Measures No.1) Rules 2026

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

The purpose of the Taxation (Multinational—Global and Domestic Minimum Tax) Amendment (2026 Measures No.1) Rules 2026 (the Amending Rules) is to make administrative amendments to ensure the effective operation of the Domestic Top up Tax under Chapter 2 of the Taxation (Multinational—Global and Domestic Minimum Tax) Rules 2024 (the Rules).

The Amending Rules ensure Stateless Entities and Hybrid Entities are appropriately accounted for in the Domestic Minimum Tax provisions in Chapter 2 to ensure administrability in enacting Australia's Domestic Minimum Tax. Minor amendments are also made to appropriately calculate a Domestic Minimum Top-up Tax amount in Australian Dollars and to produce correct outcomes for interactions with the QDMTT Safe Harbour.

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms.

Conclusion

This Legislative Instrument is compatible with human rights as it does not engage or raise any human rights issues.