As global tax reform continues to reshape the international tax landscape, Australia has joined this global effort in ensuring a fairer distribution of profits and taxing rights among countries for certain large multinational enterprise (MNE) groups by legislating relevant laws relating to the Pillar Two of the OECD/G20 Two-Pillar Solution.

This introduces a new era of compliance, transparency, and strategic tax planning requirements, adding to the already onerous obligations imposed on multinational entities in Australia.

For Australian entities within in-scope MNE groups, the obligations under Pillar Two are complex. From new return types to strict deadlines and transitional relief measures, understanding what’s required is critical to staying ahead of the curve.

This article provides an overview of Australia’s Pillar Two rules based on the relevant legislations, as well as consideration of the guidance published by the Australian Taxation Office (ATO), helping relevant entities appreciate the intricacies of the rules and be better prepared for the obligations they now have.

Overview of Australia’s Pillar Two Framework

Australia’s Pillar Two legislation, which generally aligns with the OECD Model rules, comprises the following key components:

Income Inclusion Rule (IIR): Effective for fiscal years starting on or after 1 January 2024.

Domestic Minimum Tax (DMT): Also effective from 1 January 2024.

Undertaxed Profits Rule (UTPR): Effective for fiscal years starting on or after 1 January 2025.

These rules are designed to ensure that large MNE groups pay a minimum effective tax rate (ETR) of 15% on profits earned in each jurisdiction, thereby addressing base erosion and profit shifting (BEPS) concerns.

These rules are contained in the following legislation:

• Taxation (Multinational–Global and Domestic Minimum Tax) Act 2024.
  
• Taxation (Multinational–Global and Domestic Minimum Tax) Imposition Act 2024.
  
• Treasury Laws Amendment (Multinational–Global and Domestic Minimum Tax) (Consequential) Act 2024.
  
• Taxation (Multinational–Global and Domestic Minimum Tax) Rules 2024

Entities Subject to Pillar Two Obligations

Certain entities may be excluded from these requirements (i.e. GloBE excluded entities) which include government bodies, international organisations, non-profits organisations, certain service entities and pension funds, and certain investment or real estate investment funds acting as UPEs.

Notwithstanding the exclusion, some obligations may still apply to the excluded entities such as inclusion of revenue in ascertaining the €750 million revenue threshold as well as certain disclosures which may be required in GloBE Information Return.

In addition, the rules will apply to GloBE permanent establishment, flow-through entities, and GloBE joint ventures with certain modifications.

Types of Returns and Lodgements Required

The ATO has introduced four key lodgement obligations under the Pillar Two framework:

1. GloBE Information Return (GIR): A standalone OECD-standardised return containing data to assess an MNE group’s compliance with the GloBE Rules.

2. Foreign Notification Form (FNF): Required when the GIR is lodged with a foreign tax authority. It notifies the ATO of the foreign lodgement.

3. Australian IIR/UTPR Tax Return (AIUTR): Assesses top-up tax under the Income Inclusion Rule and Undertaxed Profits Rule.

4. Australian Domestic Minimum Tax Return (DMTR): Assesses top-up tax on low-taxed Australian profits.

To streamline compliance, the ATO will consolidate the FNF, AIUTR, and DMTR into a Combined Global and Domestic Minimum Tax Return (CGDMTR). The GIR remains a separate filing obligation.

We note as of October 2025, the ATO is still finalising the development of the CGDMTR and GIR forms. The ATO is working closely with external stakeholders, including the Pillar Two Working Group and Digital Service Provider Working Group, to ensure the final forms are practical and user-friendly. These forms will then be accessible via the ATO online services as well as via the platforms of approved business software providers.

The ATO has also published a draft legislative instrument (LI 2025/D17 Taxation Administration (Exemptions from Requirement to Lodge Australian IIR/UTPR tax return and Australian DMT tax return) Determination 2025) that outlines the circumstances in which an entity need not lodge a DMTR or an AIUTR. This provides some welcome guidance on whether exemptions can apply.

In addition, Australian Pillar Two rules contain four safe harbours that provide different degrees of support for taxpayers to consider in working out whether a MNE group has an Australian top-up tax liability. Notwithstanding, this may not exclude the obligations to lodge the abovementioned returns.

Lodgement Deadlines

The first lodgement of the relevant return forms will be due 18 months after the financial year end of the MNE group. This will be shortened to 15 months for subsequent filings. Please refer below for illustration of these deadlines:

Record Keeping

It is worth noting that the Pillar Two tax legislations prescribe a record keeping period that is longer than the standard rules. Briefly, records for Pillar Two purposes must be kept until either:

• The end of 8 years after those records were prepared or obtained.
  
• 8 years after the completion of the transactions or acts to which those records relate.
  
• The end of the period of review for an assessment to which those records relate (if extended), whichever is the later.

This may require some taxpayers to adjust their current document retention policies.

Transitional ATO Compliance Approach

The existing uniform penalty provisions would still apply, with base penalty amounts similar to those imposed for significant global entities (SGE). This would mean that late lodgement of any of the relevant returns could cause the base penalty to be multiplied 500 times. That said, to support taxpayers during the initial implementation phase, the ATO has advised it will adopt a transitional compliance approach that includes:

• Balancing their focus on educating the taxpayer with the need to administer the rules consistently.
  
• Taking a ‘soft-landing’ approach to penalties where it can be demonstrated that the MNE groups have acted in good faith in attempting to comply with the relevant obligations.
  
• Penalties for failure to lodge (FTL) will generally be remitted to one penalty per MNE group during the transition period (fiscal years starting on or before 31 December 2026 and ending on or before 30 June 2028) notwithstanding the offence may be committed by more than one entity within the group.
  
• MNE groups are encouraged to take “reasonable measures” to demonstrate compliance, such as maintaining adequate records, preparing timely filings, and proactively addressing errors.

The above can be found in a draft practical compliance guidance (PCG 2025/D3 Global and domestic minimum tax lodgement obligations – transitional approach).

Key Considerations for Taxpayers

Australian entities within in-scope MNE groups should take the following steps:

• Assess applicability of Pillar Two rules based on group revenue and structure.
  
• Establish internal framework to ensure compliance with the relevant obligations.
  
• Prepare for data collection and reconciliation, especially where foreign filings are involved.
  
• Monitor developments in ATO guidance and OECD administrative updates.
  
• Engage with your tax advisers early to get the necessary support on these changes in obligations.

Conclusion

The implementation of Pillar Two in Australia marks a significant evolution in international tax compliance which will impact many taxpayers. With the first lodgements due in mid-2026, affected entities should act now to understand their obligations, prepare systems for data collection, and engage with advisors to ensure appropriate readiness.

Andersen Australia is actively supporting clients through this transition. For tailored advice or assistance with Pillar Two compliance, please contact our Corporate & International Tax team.