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At a glance
- Australia’s Pillar Two rules are in force and have retrospective application to fiscal years starting on or after 1 January 2024.
- Australia’s Pillar Two rules include a Domestic Minimum Tax (DMT) and an Income Inclusion Rule (IIR) which apply to fiscal years starting on or after 1 January 2024 and an Undertaxed Profits Rule (UTPR) which applies to fiscal years starting on or after 1 January 2025.
- The ATO has published PCG 2025/4 which outlines the ATO’s transitional compliance approach to penalties during the transition period and helps taxpayers understand expectations for compliance.
- There also has been considerable ATO website and formal public guidance released in the second half of 2025, including clarifications as to the interaction with Australia’s Country-by-Country and tax consolidation rules.
- In-scope multinational enterprise groups (MNE Groups) need to prepare for the compliance obligations that will be required under the new domestic and global and minimum tax.
- EY can assist MNE Groups with the preparation, review, and filing of their Australian and global Pillar Two returns using the EY GloBE Engine.
- EY can also support with data readiness, technology implementation, assessing eligibility for exemptions and safe harbours, record-keeping requirements, and the development of internal documentation policies to help demonstrate reasonable measures and reduce the risk of penalties.
On 26 November 2025, the Australian Taxation Office (ATO) published its Practical Compliance Guideline (PCG) 2025/4 Global and domestic minimum tax lodgment obligations – Transitional approach relating to the implementation of the Organisation for Economic Co-operation and Development's (OECD) Pillar Two global minimum tax solution in Australia.
The final PCG follows an earlier draft and provides administrative guidance on new lodgment obligations and outlines the ATO’s transitional compliance approach to penalties during the transition period. It also helps taxpayers understand expectations for compliance and how to demonstrate “reasonable measures” to mitigate penalties.
This Tax Alert also covers several other recent updates in Australia’s Pillar Two landscape including:
- ATO website guidance on Pillar Two to include new guidance on the Transitional County by Country Reporting (CbCR) Safe Harbour, including Country by Country (CbC) Reports prepared using consolidated financial data and the application of the hybrid arbitrage rules to intragroup arrangements within tax consolidated groups.
- Draft Legislative Instrument (LI) 2025/D17 regarding Australian Pillar Two lodgment exemptions released for consultation.
- Practice Statement (PSLA) 2005/2 updated to include record-keeping requirements for Pillar Two and penalties for not keeping records.
- Taxation Ruling (TR) 2006/11 updated to include Pillar Two provisions and a decline to rule provision.
- Taxation (Multinational -- Global and Domestic Minimum Tax) Amendment (2025 Measures No. 1) Rules 2025 released for consultation.
- Taxation (Multinational – Global and Domestic Minimum Tax) (Qualified GloBE Taxes) Determination 2025 registered on the Federal Register of Legislation.
Implications for taxpayers
Under Australia’s implementation of the OECD Pillar Two rules, the first Pillar Two returns for in-scope multinational enterprise groups (MNE Groups) with a December year-end are due by 30 June 2026, which is 18 months after the end of the FY2024 fiscal year. MNE Groups must act now to consider the impact of these recent Pillar Two developments on their organisation, including whether certain entities are eligible for an exemption from lodging Pillar Two returns in Australia and if they can elect to apply the Transitional CbCR Safe Harbour (TSH), as this may streamline the compliance process and mitigate risks