ATO Issues Draft Guidance on Global & Domestic Minimum Tax

Byadmin

On 16 July 2025, the Australian Taxation Office (ATO) released Draft Practical Compliance Guideline PCG 2025/D3, outlining how it will manage compliance during the transition to the new Global and Domestic Minimum Tax regime.

This measure gives effect to Australia’s adoption of the OECD’s Pillar Two GloBE rules, designed to ensure that large multinational groups pay at least 15% effective tax on their profits worldwide.

Who Is Affected?

The rules apply to multinational groups with consolidated annual revenue of at least EUR 750 million. Smaller groups are not directly affected, but the guidance sets the tone for the ATO’s approach to global tax compliance.

Key Features of the Minimum Tax

  • Income Inclusion Rule (IIR): Requires parent entities to pay top-up tax where subsidiaries pay less than 15%.
  • Domestic Minimum Tax (DMT): Ensures low-taxed profits in Australia are subject to a 15% minimum rate.
  • Undertaxed Profits Rule (UTPR): Applies as a backstop where the IIR doesn’t capture profits.

The IIR and DMT apply for fiscal years starting on or after 1 January 2024, while the UTPR takes effect from 1 January 2025.

Lodgment Obligations

Affected entities must file several new returns:

  • GloBE Information Return (GIR)
  • Foreign Notification Form (FNF)
  • Australian IIR/UTPR Tax Return (AIUTR)
  • Australian DMT Tax Return (DMTR)

These will be consolidated into a single Combined Global & Domestic Minimum Tax Return (CGDMTR). Lodgments are due 18 months after the end of the first year and 15 months for subsequent years.

Penalties & Transitional Relief

Penalties will apply for late lodgment, false statements, or poor record-keeping. For Significant Global Entities, Failure to Lodge penalties can be up to 500 times the base penalty.

However, the ATO has promised a “soft-landing” approach during the transition period (2024–2028), remitting penalties where entities demonstrate:

  • early planning and preparation
  • robust documentation and governance systems
  • proactive engagement with the ATO
  • timely correction of any errors

What This Means for Multinationals

The draft guidance is designed to encourage good faith compliance while acknowledging the challenges of adapting to complex new rules. Businesses should begin:

  • reviewing governance and reporting frameworks
  • assigning responsibility for new lodgment requirements
  • engaging with the ATO early where challenges are anticipated

✅ Takeaway: The Global & Domestic Minimum Tax represents a major shift in international tax compliance. Multinational groups should act now to strengthen their systems, reduce risk, and ensure they can meet the ATO’s expectations.

👉 Contact Richard A Bobb Chartered Accountants for advice on how these rules may affect your group and to prepare for the new compliance landscape.

Similar Posts