The ATO has updated its global and domestic minimum tax guidance to reflect the OECD’s Pillar 2 side-by-side package, outlining proposed simplifications, new safe harbours, and the potential impact on Australian compliance obligations from 2026, subject to government adoption.
The Australian Taxation Office (ATO) has updated its guidance on the global and domestic minimum tax on 23 January 2026, adding a new section to reflect the side-by-side package announced earlier in January 2026.
The OECD has announced an agreement of the Inclusive Framework (IF) on a side-by-side package. The package includes several components, including simplifications, a one-year extension of the transitional CBC reporting safe harbour, a safe harbour dealing with qualified tax incentives, and the introduction of a side-by-side system.
The adoption of the side-by-side package into Australian law is a matter for the government. Any proposed retrospective legislative amendments for the side-by-side package will be administered in line with Australia’s usual practical guidance.
A key component of the package is the side-by-side safe harbour which under the IF agreement applies to fiscal years commencing on or after 1 January 2026. The safe harbour is available to MNE groups that have an ultimate parent entity located in a jurisdiction that has a qualified side-by-side regime. The United States is currently the only jurisdiction that the IF has determined as having a qualified side-by-side regime. Under the side-by-side safe harbour, IIR and UTPR top-up tax would be deemed as zero for all constituent entities of an eligible MNE group, as well as in respect of the MNE group’s interests in GloBE joint ventures.
The side-by-side safe harbour if enacted would not change the Australian lodgment requirements for fiscal years that commenced in 2024 or 2025, and would only impact lodgment and payment obligations for fiscal years commencing from 1 January 2026 (generally due from March 2028). In addition, the side-by-side safe harbour does not impact the application of the Australian domestic minimum tax or the requirement to lodge Australian DMT tax returns (DMTRs) for any fiscal year.
On 5 January 2026, the OECD released a document outlining the Pillar 2 side-by-side package, providing further details on the arrangement previously discussed with the US in June 2025. The package confirms planned administrative and compliance simplifications to the global minimum tax and indicates that changes will be considered to align the treatment of substance-based non-refundable tax credits more closely with refundable tax credits.
Earlier, the ATO released new guidance on 17 December 2025, clarifying how Pillar 2 global minimum tax rules interact with tax consolidation for multinational enterprise (MNE) groups operating in Australia.
