Australia Taxation (Multinational—Global and Domestic Minimum Tax) Act 2024 — IIR + UTPR + QDMTT full Pillar Two implementation

Mechanism

Legal basis and OECD lineage

The Australian Pillar Two package implements the OECD/G20 Inclusive Framework GloBE Model Rules (December 2021) and subsequent Administrative Guidance. It is Australia's national response to the same international framework that produced the EU's Council Directive 2022/2523, the UK's Finance (No.2) Act 2023 Parts 3–4, Korea's AITA Chapter V, and Canada's Global Minimum Tax Act.

Uniquely among the G7+ GloBE adopters, Australia enacted all three GloBE charges in one legislative cycle rather than phasing the UTPR separately. Canada explicitly carved out the UTPR; the UK and Korea treated the UTPR as subordinate to IIR; Australia's decision to include the UTPR from the outset signals a deliberate policy choice to close the backstop immediately, particularly relevant given uncertainty about US domestic GloBE adoption.

The package comprises three instruments:

1. Framework Act (No. 132, 2024) — the primary charging statute: definitions, scope, GloBE mechanics (ETR calculation, IIR, UTPR, QDMTT), GloBE Information Return obligations, and anti-avoidance rules.

2. Imposition Act (No. 133, 2024) — companion statute required by Australian constitutional convention: Australia's Constitution (s. 55) requires that laws imposing taxation be distinct from laws dealing with any other matter. The Imposition Act carries the formal tax-charging words that the Framework Act cannot contain, mirroring the split used historically for goods and services tax, customs, and excise.

3. Legislative Instrument F2024L01740 (Taxation (Multinational—Global and Domestic Minimum Tax) Rules 2024, registered 23 December 2024) — subordinate rules providing detailed computational mechanics, safe-harbour elections (Transitional Country-by-Country Reporting Safe Harbour; Simplified Calculations Safe Harbour), and GloBE Information Return filing specifications.

Scope: all three GloBE charges

Income Inclusion Rule (IIR): An Australian ultimate parent entity (UPE), or an intermediate parent entity in the absence of a UPE in a GloBE-implementing jurisdiction, is liable for top-up tax on the low-taxed income of its constituent entities in any jurisdiction where the jurisdictional effective tax rate (ETR) is below 15%. Effective for fiscal years beginning on or after 1 January 2024 (retroactive at enactment date of 10 December 2024).

Qualified Domestic Minimum Top-up Tax (QDMTT): Australia collects top-up tax on Australian-located constituent entities' low-taxed income before any foreign IIR applies. This protects Australian taxing rights over Australian profit shortfalls. Effective for fiscal years beginning on or after 1 January 2024 (same retroactive date as IIR).

Undertaxed Profits Rule (UTPR): A backstop that allows Australia to collect residual top-up tax not collected by an IIR in another jurisdiction. Australia is the first major Pacific-region adopter to include the UTPR at inception. Effective for fiscal years beginning on or after 1 January 2025 (one year later than IIR/QDMTT, consistent with OECD-recommended UTPR phasing).

Threshold and in-scope groups

All three charges apply to Australian members of MNE groups with consolidated annual revenue ≥ EUR 750 million in at least two of the four immediately preceding fiscal years — the standard GloBE threshold matching the EU Directive, UK, Korean, and Canadian acts. Domestic-only groups and smaller MNE groups are not in scope.

ATO administration

The Australian Taxation Office is the collecting authority. ATO is administering the transition via:

• The OECD-standardised GloBE Information Return (GIR) — a single master filing covering

all constituent entities of an MNE group, due 15 months after fiscal year-end (18 months for the first transition year).

• ATO guidance notes on ETR computations and the interaction of Australian refundable tax

credits with the Qualified Refundable Tax Credit (QRTC) carve-out.

Retroactivity and first-return timing

The IIR/QDMTT effective date of 1 January 2024 — 344 days before royal assent on 10 December 2024 — creates a retroactive first-year liability for Australian-headquartered UPEs and for Australian subsidiaries of global MNEs with January–December fiscal years. First GIRs for fiscal year 1 January–31 December 2024 are due by 30 June 2026 (18-month transition first-year rule). Groups with non-calendar fiscal years have correspondingly adjusted deadlines.

Interaction with Australian refundable investment incentives

Australia's production tax credits under the Future Made in Australia (Production Tax Credits and Other Measures) Act 2024 (see 2025-02-14-australia-fmia-production-tax-credits-act) and broader Future Made in Australia Act 2024 (see 2024-05-14-australia-future-made-in-australia-act) are structurally relevant: under the OECD QRTC rules (Administrative Guidance Feb/Dec 2023), refundable credits paid within ≤4 years are treated as income rather than as a covered-tax reduction, preserving their economic value under GloBE. Non-refundable or refundable-on-a-long- lag credits reduce the ETR and can trigger top-up. Treasury confirmed in its EM that Australian PTC-class credits will be structured as QRTCs to protect their incentive value under the minimum-tax architecture.

Downstream implications

• In-scope Australian MNEs: Estimated 100–150 Australian-headquartered MNE groups

will be subject to the IIR and QDMTT from their first fiscal year beginning on or after 1 January 2024. Major affected groups include BHP, Rio Tinto, Wesfarmers, Woolworths, Macquarie, Commonwealth Bank (CBA), ANZ, Westpac, NAB, CSL, and Transurban.

• Inbound subsidiaries: Every US, EU, Japanese, Korean, Canadian, and UK MNE group

with Australian subsidiary operations and consolidated revenue ≥ EUR 750M faces Australian QDMTT liability from fiscal 2024. The QDMTT displaces parent-jurisdiction IIR claims over Australian shortfalls.

• UTPR backstop significance: Australia's UTPR is most directly relevant for

Australian-headquartered groups with subsidiary income in non-GloBE jurisdictions (e.g., US-source income from entities not covered by US GILTI reform). With the US having no domestic QDMTT and GILTI not qualifying as a GloBE-equivalent rule under 2024 OECD peer-review assessments, Australian UPEs can collect UTPR top-up on US-source constituent entities' ETR shortfalls below 15%.

• Revenue estimate: Australian Treasury projected AUD 370–450 million per annum in

additional tax revenues from in-scope groups once the regime reaches full compliance maturity (approximately fiscal year 2026–27 onwards).

• Comparison with Canada: Canada's GMTA (IIR + QDMTT only; UTPR deferred) vs.

Australia's full three-rule adoption marks the clearest structural divergence among Five Eyes/allied adopters. Australia's approach closes the UTPR backstop immediately, consistent with its advocacy in OECD Inclusive Framework consultations for full and simultaneous GloBE adoption to prevent jurisdictional arbitrage.

Open questions

• Will Australia's UTPR on US-source income become a bilateral friction point if US GILTI

reform stalls, given Australian UPEs can legally collect top-up tax on US subsidiaries?

• How will ATO and the IRS coordinate on the GloBE Information Return for dual US/Australia-

resident MNE groups?

• Does the QRTC treatment of FMIA production tax credits hold under full ATO implementation,

or will ATO guidance impose a narrower ≤4-year test than Treasury assumed in the EM?

• When will Australia issue formal guidance on the Pillar Two safe-harbour elections and

whether Australian Economic Zone (AEZ) operations qualify for the substance-based income exclusion?