In brief
Multinational enterprise (MNE) groups that are in scope of Australia’s Pillar Two rules are well underway in planning for meeting their first compliance obligations with the first of any Australian Pillar Two tax returns due to be lodged by 30 June 2026. The Australian Taxation Office (ATO) is also advanced in providing guidance and support for those affected with a range of recent materials released. This includes a legislative instrument, finalised on 22 December 2025, which sets out circumstances in which members of a MNE group will not have to lodge:
- an Australian Domestic Minimum Tax (DMT) return, and/or
- an Australian Income Inclusion Rule/Undertaxed Profits Rule (IIR/UTPR) return.
The key messages in relation to Australia’s Pillar Two lodgment obligations include:
- Lodgment obligations remain for most Australian-resident parent entities and Australian permanent establishments.
- Subsidiaries of an Australian tax consolidated or multiple entry consolidated (MEC) group are generally exempt.
- Many foreign-resident entities, securitisation vehicles and eligible flow-through entities will be relieved from 'nil' lodgment obligations pursuant to this legislative instrument.
- Exemptions must be tested separately for each entity and for each fiscal year.
- There are no lodgment exemptions for the Global Information Return (GIR) or Foreign Lodgment Notification (FLN) - these must still be lodged as required.
In detail
Overview of Australian Pillar Two lodgment obligations
Australia’s Pillar Two law has been implemented and comprises:
- a global minimum tax, which consists of:
- the IIR, which is a top-up tax (Australian IIR tax) that can be imposed on Parent Entities located in Australia if the Applicable MNE Group's effective tax rate in another jurisdiction is below 15%
- the UTPR, which acts as a backstop rule by applying a top-up tax (Australian UTPR tax) on Constituent Entities located in Australia if the Applicable MNE Group's effective tax rate in another jurisdiction is below 15% and where the profit is not brought into charge under an IIR; and
- a domestic minimum tax, which operates consistently with the GloBE Rules and provides Australia the ability to claim primary rights to impose top-up tax (Australian DMT tax) over any low-taxed profits in Australia.
Australian DMT tax and Australian IIR tax apply for fiscal years beginning on or after 1 January 2024. Australian UTPR tax applies for fiscal years beginning on or after 1 January 2025.
There are a number of Australian compliance obligations in relation to these Pillar Two taxes for each in-scope member of an Applicable MNE Group, in the absence of any approved exemption.
The table below summarises the prima facie Australian lodgment obligations.
| Return | What it covers | Who has an obligation to lodge? | Standard due date |
| Australian DMT return (DMTR) | Domestic top-up tax on low-taxed Australian profits | Every Group Entity, GloBE Joint Venture (JV) and GloBE JV Subsidiary that has (or is deemed to have) an Australian DMT amount, including a nil amount | 15 months after fiscal year-end (18 months for the first transitional year; earliest due date 30 June 2026) |
| Australian IIR/UTPR return (AIUTR) | IIR top-up tax for foreign low-taxed profits and UTPR top-up tax allocated to Australia | Every Group Entity that has (or is deemed to have) an Australian IIR/UTPR amount, including a nil amount | Same as above |
| Global 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 for that jurisdiction | Each Australian Group Entity or the ‘main entity’ of an Australian permanent establishment* | Same as above |
| Foreign lodgment notification form (FLN) | To notify the Commissioner of Taxation that a foreign entity has lodged the GIR on behalf of Australian Group Entities and the jurisdiction in which this lodgment was made | Each Australian Group Entity or the ‘main entity’ of an Australian permanent establishment, where the GIR is not lodged locally in Australia | Same as above |
*If the Ultimate Parent Entity (UPE) or a Designated Filing Entity (DFE) of the MNE Group is located in a foreign jurisdiction with a Qualifying Competent Authority Agreement (QCAA) with Australia, and lodges the GIR with the foreign tax authority, then all Australian entities are taken to have lodged the GIR at the time of that foreign lodgment (if lodged on time), noting that the relevant FLN must also be lodged with the Commissioner
It is also possible under the law to reduce the number of Australian lodgment touchpoints that an Applicable MNE Group has with the ATO through the valid appointment of a Designated Local Entity (DLE). A DLE that is GloBE located in Australia for the fiscal year can be appointed by all Australian Group Entities to lodge the GIR or FLN on their behalf. If so, the DLE can also lodge the Australian DMT return and the Australian IIR/UTPR return on behalf of each of those Group Entities which have an obligation to lodge. The DLE cannot be an entity that is excluded from the application of the Pillar Two rules or a permanent establishment. The effect of appointing a DLE is that each group entity that has an Australian lodgment obligation is taken to have met that obligation at the time the DLE lodges the returns.
The Commissioner of Taxation has the ability to extend the lodgment deadline for the AIUTR and DMTR, but not the GIR or the FLN.
The ATO is currently developing forms for the FLN, the AIUTR and the DMTR which are expected to be combined in one form - the combined global and domestic minimum tax return (CGDMTR).
When is a lodgment exemption available?
The legislative instrument - Taxation Administration (Exemptions from Requirement to Lodge Australian IIR/UTPR tax return and Australian DMT tax return) Determination 2025 - which was registered on 22 December 2025, establishes separate exemption gateways for the DMT return (sections 6 to 10) and the IIR/UTPR return (section 11). Eligibility must be assessed entity-by-entity and year-by-year.
In simple terms, the exemption will broadly apply in cases where the law could not result in there being any IIR and any UTPR tax liability for the entity in Australia.
Exemptions from the Australian DMT return
| Category | Who qualifies? | Key conditions |
| 1. Subsidiary members of a tax consolidated or MEC group (section 6 and 7) | Group Entity, GloBE JV or JV Subsidiary | Subsidiary member of an Australian tax consolidated group or MEC group — the domestic top-up tax is instead reported by the head company of the consolidated or MEC group. |
| 2. Certain GloBE JVs and JV Subsidiaries (section 7) | GloBE JV or JV Subsidiary | Not GloBE-located in Australia, not an Australian-created flow-through entity, and not the ‘main entity’ of an Australian permanent establishment. |
| 3. Foreign-located Group Entities (section 8) | Group Entity | Not GloBE-located in Australia and not:
(i) an Australian-created flow-through ‘stateless entity’, or
(ii) the ‘main entity’ of an Australian permanent establishment. |
| 4. GloBE Securitisation entities (section 9) | Group Entity, GloBE JV or JV Subsidiary | Qualifies as a GloBE Securitisation Entity which is treated under the Rules as not able to have an Australian DMT liability. |
| 5. Flow-through entities with zero profit (section 10) | Group Entity or Globe JV Subsidiary | (i) Flow-through entity that is not an Australian reverse hybrid, the ‘main entity’ of an Australian permanent establishment, or ultimate parent entity (UPE) located in Australia, and
(ii) its financial accounting net income/loss is reduced to zero under the flow-through rules, and
(iii) it has no domestic top-up tax amount.
This exemption does not apply where the Group Entity would have been the GloBE UPE of the Applicable MNE Group if any Controlling Interest held by a GloBE Excluded Entity had been disregarded. |
Exemptions from the Australian IIR/UTPR return
A Group Entity is exempt from the requirement to lodge an Australian IRR/UTPR return if both of the following limbs are satisfied for the relevant fiscal year:
- IIR limb – the entity cannot have an Australian IIR tax liability because (section 11(1)(a)):
- it is not an Australian-located Parent Entity, or
- it is an Australian Parent Entity but only holds ownership interests in Australian-located entities, or
- it is an Australian Parent Entity that is not required to apply the Australian IIR because a higher-tier Parent Entity applies a Qualified IIR.
- UTPR limb – at least one of the following applies (section 11(1)(b)):
- it is a subsidiary member of an Australian tax consolidated or MEC group, or
- it is not GloBE-located in Australia and not the ‘main entity’ of an Australian permanent establishment, or
- it qualifies as a GloBE Investment Entity or Insurance Investment Entity, or
- it qualifies as a GloBE Securitisation Entity which is treated under the Rules as not able to have an Australian UTPR tax liability, or
- Australia’s UTPR rights are ‘switched off’ because either:
- all top-up tax would be brought to account by jurisdictions applying a Qualified IIR, or
- the UPE jurisdiction benefits (or could have benefited) from the transitional UTPR safe harbour and any remaining top-up tax would be brought to account by jurisdictions applying a Qualified IIR, or
- relates to a fiscal year started on or before 31 December 2024 (prior to UTPR application).
Unlike the DMT return exemptions, there is no Australian IIR/UTPR tax return lodgment exemption available to a GloBE JV or GloBE JV subsidiaries.
No exemptions from GloBE Information Return or Foreign Lodgment Notification
The Commissioner of Taxation does not have the ability to grant an exemption in relation to the GIR or FLN. This means that an Australian Group Entity must lodge with the Commissioner, a GIR or a FLN where the GIR is lodged with a relevant foreign tax authority, even if there is no actual Australian IIR/UTPR or DMT tax return lodgment obligation or liability.
Observations
As expected, the lodgment exemptions are limited to circumstances where there is no potential for a Constituent Entity of an Applicable MNE Group to have an Australian DMT or IIR/UTPR top-up tax amount. Unless covered by another legislative instrument, there is no ability for the Commissioner to grant lodgment exemptions on a case-by-case basis in circumstances outside those which are clearly covered under this legislative instrument.
Since the law requires that a return is required to be lodged even where the top-up tax amount is nil, there will be cases where an Australian DMT or IIR/UTPR return is required for entities that have no Australian Pillar Two tax liabilities and that are not covered by the legislative instrument.
For those entities that are not covered by a lodgment exemption, the relevant returns will need to be lodged with the ATO as and when due. Note that significant penalties can apply for failing to lodge a return on time. However, during the initial period covering fiscal years commencing on or before 31 December 2026 and ending on or before 30 June 2028, the ATO has confirmed that it will remit penalties for late lodgment in full for those taxpayers that can demonstrate they have acted in good faith and taken reasonable measures to understand and comply with their lodgment obligations (refer Practical Compliance Guideline PCG 2025/4 and our Tax Alert).
As such, it is important for potentially affected entities to ensure that they review and assess their ability to meet their Pillar Two return compliance obligations as due. The ATO expects that relevant entities or the nominated DLE will contact the ATO before the lodgment due date if delays in lodgment are expected. Early engagement with the ATO is important and could result in suspension of lodgment enforcement action for the GIR and FLN or the grant of an extension of time for lodgment of the AIUTR and DMTR. Any ATO approved request for a deferred due date for lodgment does not automatically defer the due date for payment of any associated liability for which a separate extension of time might also need to be sought.
For completeness, recent developments in relation to the Pillar Two regime at the global level, including the ‘Side by Side Package’ and additional safe harbours released by the OECD still need to be legislated locally and generally the earliest these measures may apply are fiscal years commencing on or after 1 January 2026. Accordingly, the current Australian Pillar Two rules and reporting obligations remain applicable in relation to fiscal years commencing on or after 1 January 2024 until the start time for the new measures.
The takeaway
MNE groups that are in scope of Australia’s Pillar Two rules should map every Constituent Entity, GloBE Joint Venture, and GloBE JV Subsidiary against the five DMT exemption gateways and the two-limb IIR/UTPR exemption conditions to identify potential filing relief. Eligibility for exemptions must be reassessed each fiscal year, as changes in group structure, residency, safe-harbour elections, tax consolidation membership and status of other jurisdictions’ application of a Qualified IIR can alter the outcome.
Even where an exemption applies, it is essential to retain working papers demonstrating how each condition was met, as the ATO may request supporting evidence. It is also important to note that nil return obligations may still remain and the GIR and FLN are not covered by the exemption instrument and will still be required where triggered.
For entities that remain in scope, we expect that the ATO will release in due course the final format for the combined global and domestic minimum tax return well before the first lodgment date of 30 June 2026. In readiness for such filing obligations, we recommend designing data-collection processes and preparing draft return templates well before the earliest due date.
Contact us
Chris Stewart
Partner, Tax, PwC Australia
Helen Fazzino
Partner, Tax, PwC Australia
Tony Chen
Managing Director, PwC Australia
Jonathan Malone
Partner, Tax, PwC Australia
Tariq Rasool
Partner, Tax & Legal, PwC Australia
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