Australia's Global Anti-Base Erosion Model Rules (GloBE) are to be implemented as a new stand-alone tax law that imposes and assesses GloBE and domestic minimum top-up tax.
The Australian GloBE rules include the following:
- an Income Inclusion Rule (IIR) which will apply for income years starting on or after 1 January 2024
- a domestic minimum top-up tax (DMT) which will apply for income years starting on or after 1 January 2024
- an Undertaxed Profits Rule (UTPR) which will apply for income years starting on or after 1 January 2025.
Australia is a member of the OECD/G20 Inclusive Framework on BEPS and endorsed the OECD’s Two-Pillar Solution agreed to on 8 October 2021. The Pillar Two GloBE rules involve the introduction of a global minimum tax requirement set at a 15 percent effective tax rate (ETR).
The GloBE rules generally apply to Constituent Entities (CEs) that are members of a Multinational Enterprise (MNE) Group that has annual consolidated revenue of €750 million or more in at least two of the preceding 4 years. To be in scope, a group must have at least one entity or permanent establishment that is not located in the jurisdiction in which the Ultimate Parent Entity (UPE) of the group is located.
A discussion paper has also been included to assist stakeholders in providing feedback on interactions between the exposure draft primary legislation and provisions in Australia’s existing income tax law, including:
- hybrid mismatch rules
- controlled foreign company (CFC) rules
- foreign income tax offsets.
The core rules for implementation of the Pillar Two rules would be effective from 1 January 2024.
In the 2023-24 Federal Budget, the Australian Government announced its intention to implement Pillar Two and a domestic minimum tax, and the draft legislative package is consistent with the announcement.
Consultation on the primary legislation closes 16 April 2024, and consultation on the subordinate legislation closes 16 May 2024.
Read KPMG's full analysis of the draft Australian Pillar 2 legislation:
