Australia: ATO issues draft guidance on Pillar Two filings

The consultation period for the draft guidance closes on 29 August 2025.

The Australian Taxation Office (ATO) has issued draft guidance, PCG 2025/D3, on 16 July 2025  detailing its transitional approach to Pillar Two filing obligations. This includes implementing the OECD’s transitional penalty relief framework and providing updates on private binding rulings concerning Pillar Two matters.

What this draft Guideline is about

Australia’s implementation of a 15% global and domestic minimum tax (Minimum Tax) introduces additional lodgment obligations for in-scope multinational enterprise groups (MNE Groups. The Minimum Tax implements the Organisation for Economic Co-operation and Development’s (OECD’s) Global Anti-Base Erosion Model Rules (GloBE Rules).

The Minimum Tax applies to Applicable MNE Groups, which are MNE Groups that have annual revenue in their Consolidated Financial Statements equal to or greater than EUR750 million for at least two of the four Fiscal Years immediately preceding the tested fiscal year.

The Minimum Tax lodgment obligations were inserted by the Treasury Laws Amendment (Multinational – Global and Domestic Minimum Tax) (Consequential) Act 2024 into Schedule 1 to the Taxation Administration Act 1953 (TAA). Failure to comply with these obligations can incur significant penalties.

This draft Guideline outlines the practical administrative approach to the enforcement of penalties during a transition period. This approach aims to balance the need to support taxpayers to understand and comply with their Minimum Tax obligations with the need to administer the introduced legislation in a manner that is consistent with the OECD’s GloBE Rules.

This Guideline is intended to complement existing ATO guidance relating to our administration of lodgment obligations and penalties. It provides tailored advice to assist in-scope taxpayers in meeting their obligations during the transition period.

Background

The Minimum Tax comprises:

• a global minimum tax, which consists of 2 interlocking rules
  • Income Inclusion Rule (IIR) – under this rule, parent entities located in Australia can be liable to pay top-up tax (that is, “Australian IIR tax”) if the MNE Group’s effective tax rate in another jurisdiction is below 15%;
  • Undertaxed Profits Rule (UTPR) – This rule acts as a backstop to the IIR. Constituent entities located in Australia can be liable to top-up tax (that is, “Australian UTPR tax”) under the UTPR if the MNE Group’s effective tax rate in another jurisdiction is below 15% and those low-taxed profits are not brought into charge under an IIR.
• a domestic minimum tax (DMT), which provides Australia the ability to impose top-up tax (that is, “Australian DMT tax”) over any low-taxed profits in Australia.

Australia’s IIR and DMT apply in relation to Fiscal Years starting on or after 1 January 2024. The UTPR applies in relation to Fiscal Years starting on or after 1 January 2025.

The Treasury Laws Amendment (Multinational – Global and Domestic Minimum Tax) (Consequential) Act 2024 introduces four lodgment obligations in respect of the Minimum Tax:

• The GloBE Information Return (GIR) – an OECD standardised form that provides each jurisdiction’s tax authority with the information required to calculate an entity’s tax liability
• The Foreign Notification Form (FNF)  – which notifies the Commissioner that a foreign entity has lodged the GIR on behalf of Australian Group Entities and the jurisdiction in which this lodgment was made
• The Australian IIR/UTPR tax return (AIUTR) – an Australian-specific tax return that forms the basis of our assessment of Australian IIR tax and Australian UTPR tax
• The Australian DMT tax return (DMTR) – an Australian-specific tax return that forms the basis of our assessment of Australian DMT tax.

The FNF, AIUTR, and DMTR are separate lodgment obligations. However, for ease of lodgment, we have combined them into the Combined Global and Domestic Minimum Tax Return (CGDMTR). The GIR is a standalone form (and lodgment obligation) and is not combined into the CGDMTR.

The due date for these lodgment obligations is aligned, being 18 months after the end of the Applicable MNE Group’s GloBE Transition Year and 15 months after the end of subsequent Fiscal Years.

GloBE Information Return

Where an MNE Group is an Applicable MNE Group for a Fiscal Year, each Group Entity that is located in Australia and each foreign Group Entity that has a GloBE Permanent Establishment (PE) in Australia is required to lodge a GIR in Australia for that Fiscal Year.

A GIR must be lodged:

• electronically
• in the approved form
• by the due date

Transition Period

The transition period to which this Guideline applies is the “Transition Period” as defined in the OECD common understanding. It covers Fiscal Years commencing on or before 31 December 2026 and ending on or before 30 June 2028.

For example, for MNE Groups with a Fiscal Year ending 31 December, the Transition Period covers 3 Fiscal Years:

• 1 January 2024 to 31 December 2024
• 1 January 2025 to 31 December 2025
• 1 January 2026 to 31 December 2026

The compliance approach outlined applies to the lodgment obligations of an MNE Group for Fiscal Years that fall within the Transition Period. For instance, this approach is applicable to a GIR for the Fiscal Year ending on 31 December 2026, even if the lodgment due date occurs 15 to 18 months later.

During the Transition Period, the compliance strategy will incorporate the OECD’s common understanding regarding transitional penalty relief. The approach aims to strike a balance between providing education and assistance to taxpayers, helping them meet their obligations, and administering the Minimum Tax in alignment with the GloBE Rules.

The draft guidance will remain open for consultation until 29 August 2025.