Australia’s Treasury has proposed amendments to its global and domestic minimum tax rules, introducing Side-by-Side and Ultimate Parent Entity safe harbours to reduce top-up tax liabilities for qualifying multinational groups, alongside changes to deferred tax liability tracking and CFC tax allocation. Submissions close on 26 November 2026.
The Australian Treasury has launched a consultation on the fourth tranche of draft amendments to the global and domestic minimum tax rules on 12 November 2026. The proposed changes would introduce safe harbours that could reduce top-up tax liabilities for multinational enterprise (MNE) groups, particularly those headquartered in the US.
The draft amendments—formally titled the Taxation (Multinational—Global and Domestic Minimum Tax) Amendment (2026 Measures No. 3) Rules 2026 (the Amending Rules)—are made under section 29 of the Taxation (Multinational—Global and Domestic Minimum Tax) Act 2024 (the Assessment Act).
Their primary objective is to implement elements of the OECD/G20 Inclusive Framework’s Agreed Administrative Guidance from June 2024 and January 2026, ensuring that Australia maintains qualified status under the global Pillar Two framework.
While the general amendments apply retrospectively from 1 January 2024, the new safe harbour provisions in Chapter 8 apply from 1 January 2026 to align with the OECD implementation schedule.
The deadline for submitting comments on the draft amendments is 26 November 2026.
The key details of the amendments are summarised below:
The Side-by-Side (SbS) Safe Harbour
The Side-by-Side (SbS) Safe Harbour allows multinational enterprise (MNE) groups headquartered in jurisdictions with qualifying minimum tax regimes to avoid certain top-up tax liabilities under the OECD GloBE rules.
An annual election by the Filing Constituent Entity treats top-up tax under both the Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR) as zero for all constituent entities across the group’s jurisdictions, including stateless entities, joint ventures, and minority-owned entities.
However, the safe harbour does not affect Australia’s Domestic Minimum Tax (DMT), which continues to apply to Australian entities. Eligibility requires a ministerial determination that the ultimate parent entity’s (UPE) jurisdiction operates a Qualified SbS Regime.
The Ultimate Parent Entity (UPE) safe harbour
The UPE Safe Harbour reduces UTPR top-up tax to zero for constituent entities located in the UPE’s jurisdiction. It does not provide relief from IIR or Domestic Minimum Tax liabilities. Eligibility requires a ministerial determination that the UPE jurisdiction operates a Qualified UPE Regime, taking account of OECD guidance and the OECD Central Record.
Deferred tax liability (DTL) tracking mechanism
The amendments establish three methods for tracking deferred tax liabilities (DTLs) subject to the five-year recapture rule: item-by-item, general ledger (GL), and aggregate methods. They introduce consistency safeguards and restrictions on aggregating certain accounts, including swinging accounts, accounts generating only deferred tax assets, specified intangible assets, and related-party balances.
Under the GL and aggregate methods, recaptured DTL is calculated using the increase in the unjustified balance over the five-year testing period. LIFO is the default approach, although FIFO may be elected in specified circumstances.
Entities may also make annual or five-year unclaimed accrual elections to exclude qualifying DTL increases from the Total Deferred Tax Adjustment Amount.
CFC allocation and flow-through entity clarifications
The amendments clarify how controlled foreign company (CFC) taxes imposed on tax-transparent entities are allocated to constituent reference entities, either through the relevant ownership chain or proportionally according to allocated GloBE income. They also allow natural persons, alongside legal entities, to hold direct ownership interests in flow-through entities acting as the group’s UPE.
Additionally, forthcoming amendments will exempt wholly Australian domestic groups with flow-through entities from unintended top-up tax liabilities and GloBE Information Return (GIR) and Australian DMT filing requirements.
Practical impact and compliance timelines
The safe harbours are expected to reduce IIR and UTPR exposure for qualifying MNE groups, particularly those headquartered in the US, while preserving Australia’s right to impose DMT on domestic profits at the 15% minimum rate.
The amendments also provide a legal basis for claiming safe harbour elections and applying standardised DTL tracking methods, supporting alignment with updated GloBE Information Return requirements and Australian Taxation Office (ATO) guidance.
