Australian tax filing obligations for Pillar Two rules

Who’s in scope?

The Pillar Two rules apply to MNE groups with:

• at least one entity or permanent establishment outside the jurisdiction of the ultimate parent entity of the group; and 
• consolidated annual revenue of at least €750m (or the AUD equivalent) in at least two of the four fiscal years immediately preceding the “test year”. Revenue is determined by ordinary accounting concepts and must be reflected in the group’s consolidated financial statements.

If these criteria are met, the group and its Australian entities are “in scope” and must comply with the Pillar Two lodgement obligations. It’s crucial to assess whether any entities qualify as excluded entities (e.g., government bodies, non-profits, pension funds), as such entities may be exempt from certain lodgement obligations.   

Who needs to lodge? 

Each Australian Group Entity must lodge a GIR (or FLN), AIUTR and DMTR unless a Designated Local Entity (DLE) is nominated. Where a DLE is appointed, all entities are deemed to have lodged at the time the DLE lodges. This means that if the DLE lodges late, all entities are deemed to have lodged late. 

The Australian Group can file a FLN instead of the GIR where the group has/will lodge the GIR by the due date in a jurisdiction has a Qualifying Competent Authority Agreement (QCAA) with Australia.

To get ready for lodgement under Australia’s Pillar Two regime, multinational groups should take proactive steps aligned with the ATO’s Practical Compliance Guideline (PCG) and its transitional ‘soft landing’ approach. 

The PCG emphasises that penalty relief will only apply where groups can demonstrate they have taken reasonable measures to comply. This means documenting governance and readiness activities such as establishing a lodgement calendar, registering the DLE, and confirming what assessments have already been undertaken by the UPE.

Key Lodgement requirements with the ATO

1(a). Globe Information Return (GIR)

• A reporting-only form enabling tax authorities to assess compliance with the GloBE rules.
• Can be lodged directly with the ATO (by an individual entity or DLE) or by a UPE/DFE in a foreign jurisdiction if that jurisdiction has a QCAA with Australia. 
• A GIR must be submitted, even if no top-up tax is payable. 

OR

1(b). Foreign Lodgement Notification (FLN) 

• Notifies the ATO that the GIR has been, or will be, lodged in a foreign jurisdiction.

2. Australian IIR/UTPR Tax Return (AIUTR)

• Facilitates assessment and payment of top-up tax under the Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR).
• Each Australian group entity must lodge an AIUTR, even where the IIR and/or UTPR liability is nil. The AIUTR may be lodged by a DLE appointed to act on behalf of the local group. 

3. Australian Domestic Minimum Tax Return (DMTR)

• The Domestic Minimum Tax (DMT) gives Australia priority to impose top-up tax on low-taxed Australian entities, and lodgement is required for entities regardless of whether the DMT liability is nil.
• Certain entities may be exempt from lodging the DMTR, including but not limited to certain subsidiary members of consolidated groups, non-GloBE entities located in Australia, certain securitisation entities and certain flow-through entities. 

Lodgement due dates

All forms are required to be lodged within the following timeframes

• First fiscal year: 18 months after the year-end.
• Subsequent years: 15 months after the year-end.

Therefore, examples of the first-year lodgement due dates based on year-end are set out below.  

Whilst the Commissioner of Taxation has such discretion to extend the lodgement date for domestic tax returns, there is no statutory discretion to extend the due date for the GIR or FLN. 

Note, if the GIR is being lodged in a foreign jurisdiction, and is lodged late, the ATO may require you to lodge the GIR in Australia and Failure to Lodge (FTL) penalties may apply. If the GIR is lodged on time, but is not exchanged within QCAA timeframes, the ATO can require lodgement within 21 days of issuing a written notice. 

Penalties 

The FTL penalties for in-scope entities are 500 times the base penalty. These penalties currently range from $165,000 AUD for being just one day late, to $825,000 AUD for being more than 112 days late. They apply on a ‘per form’ basis and are imposed regardless of whether the taxpayer is in a tax payable position. Therefore, it is essential that these returns are lodged on time.  

However, as mentioned earlier, the ATO may not impose FTL penalties during the Transition Period if MNEs have take ‘reasonable measures’ to correctly apply the GLoBE rules. The ATO have said that they will adopt a ‘soft landing approach’ to penalty enforcement where the MNE Group can demonstrate it has acted in good faith and made genuine efforts to understand and comply with the lodgement obligations.  

Transitional Safe Harbours 

There are four safe harbours in the Pillar Two legislation that are designed to reduce MNE’s compliance burden. They apply for years beginning on or before 31 December 2026 but not including fiscal years that end after 30 June 2028. These are: 

• Transitional country-by-country reporting (CbCR) safe harbour: This allows MNEs to use existing CbCR data for compliance. 
• QDMTT safe harbour: This eliminates the need for GLoBE calculations if a jurisdiction applies QMDTT.  
• Non-material constituent entity simplified calculations safe harbour: Provides simplifications for non-material entities.  
• Transitional UTPR safe harbour: This reduces their UTPR top-up tax amount in respect of the UPE jurisdiction (only) to nil if the UPE jurisdiction has a nominal corporate income tax rate of at least 20%. Note, the UTPR only applies in Australia from income years starting 1 January 2025, so the UTPR safe harbour is currently not applicable. 

Practical Steps for Compliance

To align with ATO expectations and ensure smooth compliance, we recommend the following actions for all MNEs:

• Confirm applicability: Assess whether your group meets the €750 million threshold. This may be more complex where accounts are not prepared in Euro.  
• Confirm the UPE jurisdiction: Staggered implementation dates of Pillar Two rules can make this more complex. 
• Determine whether any of the Pillar Two safe harbours apply: For example, does the group have a Qualified CbC report to support safe harbour eligibility. We recommend taxpayers review and document their eligibility to apply the safe harbour rules year-on-year. 
• Establish governance: Decide if a DLE will manage lodgement obligations and allocate responsibilities for preparing and submitting forms.
• Evaluate systems and data readiness: Review and upgrade financial reporting and tax data collection processes to support GloBE disclosures. Document all compliance actions taken, including system enhancements, project milestones, governance protocols, and advisor engagements, especially during the transitional period.

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