Pillar Two – are 30 June taxpayers ready for their first filings?

Australian-headquartered outbound groups in scope of Pillar Two with a 30 June 2025 year-end face their first global and domestic minimum tax filings by 31 December 2026.

Following the first wave of compliance for 31 December 2024 year-end groups, we are sharing some key learnings from this process.

With a little over 3 months remaining, affected groups that have not started data collection, entity mapping and safe harbour testing should mobilise now.

Who is affected?

The rules apply to Applicable MNE Groups, being groups with consolidated revenue of EUR750 million or more in at least two of the four fiscal years immediately preceding the tested year.

Australia's Income Inclusion Rule (IIR) and domestic minimum tax (DMT) apply to fiscal years starting on or after 1 January 2024, and the Undertaxed Profits Rule (UTPR) to fiscal years starting on or after 1 January 2025. 

For an Australian outbound group with a 30 June balance date, the year ended 30 June 2025 is generally the first year for which Australian filings are required.

What has to be lodged, and when?

Two separate lodgments are required:

• the GloBE Information Return (GIR), and
• the Combined Global and Domestic Minimum Tax Return (CGDMTR), which includes the GloBE Information Return foreign lodgment notification (FLN) (where the GloBE Information Return is lodged offshore), the Australian Income Inclusion Rule/Undertaxed Profits Rule tax return and the Australian domestic minimum tax return.

Returns are due even where Pillar Two Top-up Tax is nil, and the Commissioner has no power to defer the lodgment due date for the GloBE Information Return.

For a 30 June 2025 year-end that means the GloBE Information Return is due by 31 December 2026. The statutory due date for the Combined Global and Domestic Minimum Tax Return is also 31 December 2026, but the ATO has granted an automatic 30-day lodgment deferral by 30 January 2027 for first year filings. After the first year, the FY26 filings are due only nine months later, on 30 September 2027.

Any Australian Income Inclusion Rule, Undertaxed Profits Rule or domestic minimum tax top-up tax for FY25 is also due and payable on 31 December 2026, so the Australian Pillar Two exercise results in a cash-tax deadline as well as a compliance deadline.

What goes into a GloBE Information Return?

The GloBE Information Return is a standardised, group-wide return rather than an Australian entity-level return and is required to be lodged electronically as an XML schema, in accordance with the standardised return developed under the GloBE Implementation Framework.

The GloBE Information Return contains identification of the group's Constituent Entities including:

• the jurisdiction in which each is GloBE located and its status under the GloBE Rules
• information on the overall corporate structure of the group for the fiscal year
• information relevant to determining Effective Tax Rates, Top-up Tax and the allocation of Top-up Tax,
• the elections made for the year, and
• any other information agreed as part of the Implementation Framework.

In practice this means the disclosures are extensive and cover the structure of the group, the liability for top-up tax and the underlying calculations, not merely the Australian outcome. It is critical that, as a starting point, the Applicable MNE Group identify all Constituent Entities and Joint Ventures (JVs) which may be within the scope of the rules.

Structurally, the GloBE Information Return is organised into three parts, and the XML schema the ATO accepts contains five elements:

1. “Filing Info” maps to labels 1.1 to 1.2 and is completed once per return, covering the filing entity and the recipient jurisdictions for exchange of information.
2. The “General Section” maps to label 1.3 and is also completed once, carrying the corporate structure tables and the group's elections.
3. A “Summary” maps to table 1.4 and is completed for each jurisdiction in which the group operates.
4. A “Jurisdiction Section” maps to Parts 2 and 3 and is completed where a jurisdiction has taxing rights, with the safe harbour and exclusion positions reported through the “ETR Exception” element in Part 2 and the full GloBE computation reported through the “ETR Computation” element in Part 3.
5. “Undertaxed Profits Rule Attribution” maps to Part 3.4.3 and is not completed for first-year lodgments.

The practical consequence for a 30 June balancer is that the volume of Part 3 data required depends on how many jurisdictions fail a safe harbour, so safe harbour testing should be completed before data collection is scaled up.

The mechanical issues associated with translating the GloBE Information Return into the approved form, typically with the support of a software solution, are time consuming, often arduous and validation errors are common. Being able to test for validation errors well in advance is a key planning recommendation.

Safe harbour considerations

As mentioned above, testing to confirm whether the transitional safe harbour elections are first available, and then satisfied is a critical step in the Pillar Two process and will assist in reducing the volume of GloBE Information Return reporting.

The Transitional CbCR Safe Harbour deems jurisdictional top-up tax to be zero where an election is in place and the jurisdiction meets the De minimis, Simplified ETR or Routine Profits test, but Groups can only rely on it in jurisdictions where it had applied (and satisfied the requirements to apply) the safe harbour from the first year of the transition period in respect of that jurisdiction and has applied continuously since. This is particularly important for the June 2025 filings in establishing this availability for future filings.

As a threshold question, the Transitional CbCR Safe Harbour relies on a Qualified CbC Report, meaning a Country-by-Country Report prepared and filed using Qualified Financial Statements, so groups should first confirm that the FY25 CbC Report meets that standard and that the underlying data source qualifies, before testing outcomes jurisdiction by jurisdiction.

Where eligibility does not hold for a jurisdiction, the full GloBE computation will generally be required for that jurisdiction, so the sequencing of this assessment materially affects the data collection effort.

Does a nil Top-up Tax position remove the obligation?

Generally, no. Each Australian group entity has a GloBE Information Return lodgment obligation even where its Australian Income Inclusion Rule/Undertaxed Profits Rule and/or Australian domestic minimum tax Top-up Tax amounts are nil, and the AIUTR and DMTR are required where there is an Australian Income Inclusion Rule/Undertaxed Profits Rule or domestic minimum tax tax amount including a nil amount, unless a lodgment exemption applies. Relief is available under a legislative instrument that exempts certain entities, including subsidiary members of tax consolidated groups, from lodging the AIUTR and DMTR, and GloBE excluded entities have no Pillar Two lodgment obligations at all. See our earlier Alert for further detail. 

Who files, and through which channel?

The default is that every group entity GloBE located in Australia is required to lodge a return (subject to any applicable exemptions). Groups can reduce this compliance burden by nominating a single Designated Local Entity (DLE) to lodge the GloBE Information Return, the foreign lodgment notification, the AIUTR and the DMTR on behalf of all Australian entities, on a one-in, all-in basis. 

An entity is “GloBE located in Australia” if it is an Australian entity under the Income Tax Assessment Act 1997, is tax resident here under a treaty tie-breaker, or for a Permanent Establishment, carries on business in Australia through a branch, regardless of where the entity is incorporated or managed. Certain ‘Stateless’ entities (e.g. trusts created in Australia but held directly by foreign group entities) may also have filing (and potentially Top-up Tax) obligations.

There is no separate Designated Local Entity nomination form that is required to be submitted, however it must be documented and retained on file prior to filings being made. Importantly, if the Designated Local Entity lodges late, every group entity is taken to have lodged late.

For Australian-headquartered outbound groups, the ATO expects the GloBE Information Return will generally be lodged in Australia, as an XML file through Online services for business or Online services for agents.

The Combined Global and Domestic Minimum Tax Return is a separate online form, and where a Designated Local Entity lodges for more than 20 entities an API-enabled solution is required, supporting up to 300 entities.

Critically this means that online access to your business will be required from any nominated Pillar Two agent or the responsible people internally. Where there are multiple agents for different tax roles, note that the ATO may take some time to process requests in generating the Global and Domestic Minimum Tax (GDMT) account which is required to nominate a Pillar Two Agent to support with this filing.

What if the group cannot lodge on time?

The Commissioner has power to defer the due date for the AIUTR and DMTR, but not for the GloBE Information Return (or the foreign lodgment notification where the GloBE Information Return is lodged outside of Australia). For the GloBE Information Return/foreign lodgment notification the only relief the Commissioner may provide is a suspension of lodgment enforcement action.

The ATO’s PCG 2025/4 sets out a soft-landing approach to penalties for fiscal years commencing on or before 31 December 2026 and ending on or before 30 June 2028, which covers FY25 through FY27 for a 30 June balancer. That relief is not a blanket concession: the onus is on the group to demonstrate it acted in good faith and took reasonable measures, and full remission of failure to lodge on time penalties will typically be granted only where the group proactively engages before the due date and evidences those measures.

While this ‘soft landing’ has been promised, our experience is that we have not yet seen this evidenced in practice. Where possible, we would recommend that you aim to lodge on time or submit requests for the ATO’s consideration well in advance to confirm if an extension or suspension of enforcement action will be granted.

Where penalties are imposed, the base penalty amount for failure to lodge is 500 times the standard amount, aligned with the significant global entity regime, so the exposure is material.

What should businesses be preparing now?

The immediate priorities are scoping and data collection. Groups should first confirm whether Pillar Two applies for the June 2025 year, and following that, start collection of the relevant data to perform jurisdictional safe harbour reviews.

Where safe harbour concessions are available, this materially reduces the GloBE Information Return data required for that jurisdiction.

Where safe harbour concessions are not available, full GloBE calculations will be required as well as detailed disclosures on a per entity basis.

Some key questions you need to be asking:

1. Is my Country-by-Country Report Qualified for the purposes of the Transitional CbCR Safe Harbour?
2. What safe harbour concessions does each entity satisfy?
3. Is my business ready to have all of this data available and the right resources to prepare and lodge the GloBE Information Return in the required XML format?

Given the approaching deadline, these assessments and information gathering need to happen as soon as possible to meet the compliance deadline.

PwC’s team of Australian and global Pillar Two specialists can assist with all technical and compliance matters required for your global group.

Our team has developed proprietary technology used across our global network to prepare GloBE Information Returns and Combined Global and Domestic Minimum Tax Returns in the required file formats.

Contact us today to discuss how we can help you prepare for these upcoming compliance obligations.