House of Representatives

Explanatory Memorandum

(Circulated by authority of the Assistant Minister for Competition, Charities and Treasury, the Hon Dr Andrew Leigh MP)

Chapter 1: Taxation (Multinational - Global and Domestic Minimum Tax) Imposition Bill 2024

Outline of chapter

1.1 This Chapter explains the operation of the Taxation (Multinational—Global and Domestic Minimum Tax) Imposition Bill 2024 (Imposition Bill).

Summary of new law

1.2 The Imposition Bill is a taxation bill which imposes global and domestic minimum taxes in respect of profits of MNEs that have been undertaxed. In these explanatory materials, these taxes are referred to as top-up taxes.

Detailed explanation of new law

1.3 To comply with section 55 of the Constitution the Imposition bill deals only with the imposition of top-up tax.

1.4 The top-up tax is as follows:

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Tax payable in accordance with subsection 8(1) of the Assessment Bill (Australian DMT tax) is imposed.

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Tax payable in accordance with subsection 6(1) of the Assessment Bill (Australian IIR tax) is imposed.

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Tax payable in accordance with subsection 10(1) of the Assessment Bill (Australian UTPR tax) is imposed. [Section 3 of the Imposition Bill]

Commencement, application, and transitional provisions

1.5 The Imposition Bill commences at the same time as the Assessment Bill. [Table item 1 in subsection 2(1) of the Imposition Bill]

1.6 However, if the Assessment Bill does not receive Royal Assent, then the Imposition Bill does not commence and top-up tax cannot apply. This ensures that all related legislation must be enacted before top-up tax can apply. The effect of this is that, if Royal Assent is obtained, Australian DMT tax and Australian IIR tax imposed under subsections 8(1) and 6(1) of the Assessment Bill respectively, apply for Fiscal Years commencing on or after 1 January 2024 and Australian UTPR tax, imposed under subsection 10(1) of the Assessment Bill, applies for Fiscal Years commencing on or after 1 January 2025, when each of those provisions of the Assessment Bill take effect. [Table item 1 in subsection 2(1) of the Imposition Bill]