Federal Budget Tax | Analysis and insights

International tax and trade

Insight
May 12, 2026

Key takeaways

Australia’s global and domestic minimum tax laws will be amended to implement the OECD/G20 Side-by-Side Package, with effect from 1 January 2026—large multinational groups in scope of Pillar Two should reassess their 2026 compliance position, including the potential availability of new safe harbours

Businesses importing or purchasing goods previously subject to the latest “nuisance tariffs” should assess the impact of their abolition, for example, where they may have previously been paying customs duty (either directly or indirectly) and also consider the proposed abolition of another 86 tariffs from 1 July 2027.

Existing Australian Trusted Traders or businesses considering entering into the program should consider the potential benefits under its expansion. In particular, those who export to ASEAN countries should assess the potential benefits of the Origin Waiver benefit available as an Approved Exporter.

Pillar Two—Side-by-Side Package

The Government has announced in the 2026-27 Federal Budget that it will amend Australia's global and domestic minimum tax legislation, applicable from 2024, to implement the “Side-by-Side Package” agreed by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting on 5 January 2026. The measure will apply from 1 January 2026, consistent with the OECD start date.

This package introduces several changes to the Global Anti-Base Erosion (GloBE) Model Rules, including a new Side-by-Side Safe Harbour and an Ultimate Parent Entity (UPE) Safe Harbour for groups headquartered in eligible jurisdictions, a permanent Simplified Effective Tax Rate (ETR) Safe Harbour, a one-year extension of the transitional Country-by-Country Reporting (CbCR) safe harbour and a new Substance-based Tax Incentive (SBTI) Safe Harbour. Further detail is set out in PwC's publication “OECD publishes Pillar Two Side-by-Side System” (7 January 2026).

The measure will affect large multinational groups within the scope of Australia’s existing Pillar Two rules. Affected groups should reassess their 2026 and later Pillar Two modelling, consider whether any of the new safe harbours may apply, and any resulting changes for upcoming tax accounting positions. Pillar Two compliance obligations for the 2024 and 2025 fiscal years remain unchanged, including the potential application of the Undertaxed Profits Rule (UTPR) for the 2025 fiscal year for groups that may benefit from the new Side-by-Side Safe Harbour from 2026 and going forward.

Abolition of Second Tranche of so called “Nuisance Tariffs” and Potential Third Tranche

Abolition of second tranche of 497 “nuisance tariffs” from 1 July 2026, adding to the 457 removed in July 2024. This measure aims to streamline $23 billion in trade and save businesses $157 billion annually in compliance costs. Some of the nuisance tariffs eliminated include those on imported goods such as wine glasses, tyres, air conditioners, margarine, and bitumen.

Treasury has also invited submissions with respect to 86 specific tariffs flagged for abolition from 1 July 2027. After successive free trade agreements, many of these goods are now imported duty-free, meaning that these tariffs are largely unnecessary. By removing these nuisance tariffs, businesses will no longer need to spend time and money proving their imports are eligible for existing tariff preferences and concessions. Submissions are due to Treasury by 11 January 2027.

Expansion of the Australian Trusted Trader Program to include Approved Exporter Scheme

The Federal Government will invest $7.6 million over four years from 2026–27 (and $0.2 million per year ongoing) to boost productivity through the expanding of the Australian Trusted Trader (ATT) program through the establishment of a new business development function and implementing an Approved Exporter Scheme.

The ATT program is a trade facilitation scheme that provides benefits to importers who qualify and are approved by the Australian Border Force (ABF) to enter into the program, where they can evidence a history of trade compliance and governance with respect to supply chain security.

The Approved Exporter Scheme will be available to accredited Australian Trusted Trader exporters as an opt‑in scheme and will bypass the need to obtain Certificates of Origin to take advantage of tariff reductions under certain Free Trade Agreements including the ASEAN‑Australia‑New Zealand Free Trade Area and the Regional Comprehensive Economic Partnership Agreement.

Fuel excise and Road User Charge reduction

As previously announced, the Government has temporarily reduced the excise and excise-equivalent customs duty on most fuel products from 1 April 2026 for three months, halving the excise rate to 32 cents per litre for diesel and petrol and reducing the road user charge to nil. The Budget does not suggest that this will continue beyond 30 June 2026.

Extension of duty exemption for Ukrainian goods

The Government will extend for a further two years, to 3 July 2028, the duty exemption for Ukrainian goods in response to Russia’s ongoing illegal invasion of Ukraine. This measure applies a “free” rate of duty to all goods that Ukraine produces or manufactures, except for excise‑equivalent goods, such as certain alcohol, fuel, tobacco and petroleum products, which will remain subject to excise‑equivalent customs duty.

Paul Cornick

Partner, National FTC and Excise Leader, PwC Australia

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Chris Stewart

Partner, Tax, PwC Australia