Australia passes Bills to implement global and domestic minimum tax legislation

At a glance

• Legislation passed to implement:
  • An Income Inclusion Rule (IIR) applying to years starting from 1 January 2024
  • An Undertaxed Profits Rule (UTPR) applying to years starting from 1 January 2025 
  • A domestic minimum tax (DMT) applying to years starting from 1 January 2024
• The Australian Taxation Office (ATO) has formed a special purpose working group to discuss and seek feedback on the administrative aspects of the implementation of the Pillar Two measures. 
• In-scope groups need to prepare the financial reporting and compliance obligations that will be required under Australia’s new global minimum tax.
• How EY can help.  

The Australian Parliament has passed legislation to implement Pillar Two of the OECD/G20 Two-Pillar solution in domestic law, including a 15 per cent global minimum tax and domestic minimum tax (DMT). This reflects a significant milestone in Australia’s implementation of the OECD’s Pillar Two global minimum tax solution. In-scope groups need to prepare for the financial reporting and compliance obligations that will be required as a result of this new law.

This follows the release of Exposure Drafts (EDs) for public consultation in March 2024 and the introduction of the Bills into Parliament in July 2024. The legislation is now awaiting Royal Assent.
The primary legislation consists of three Bills:

• Taxation (Multinational – Global and Domestic Minimum Tax) Bill 2024 (Assessment Bill)
• Treasury Laws Amendment (Multinational – Global and Domestic Minimum Tax) (Consequential) Bill 2024 (Consequential Bill)
• Taxation (Multinational – Global and Domestic Minimum Tax) Imposition Bill 2024 (Imposition Bill)

The Assessment Bill includes the key aspects of the global and domestic minimum taxes, including the imposition of top-up tax through an Income Inclusion Rule (IIR) and a DMT applying to fiscal years starting from 1 January 2024 and an Undertaxed Profits Rule (UTPR), applying to fiscal years starting from 1 January 2025. The IIR and DMT have retrospective commencement for fiscal years starting on or after 1 January 2024. The retrospective commencement from 1 January 2024 is in line with that stipulated by the OECD.

The Consequential Bill contains consequential and miscellaneous provisions to facilitate the administration of the top-up tax, including the preparation of new returns that are required to be filed in Australia by in-scope multinational enterprise groups (MNE Groups).

The majority of Australia’s Pillar Two rules are contained in the subordinate legislation. The subordinate legislation, in the form of Rules, comprise the key operative aspects in line with the OECD’s Model Rules, including Transitional Country by Country Reporting (CbCR) Safe Harbours. The Rules are a legislative instrument that is required to be executed by the Minister, which may occur prior to 31 December 2024, and will be tabled in Parliament when it next sits in 2025. The Rules will also have retrospective commencement to fiscal years starting on or after from 1 January 2024.