Global minimum tax reforms pass the Senate
Legislation to introduce a 15 per cent global minimum tax and domestic minimum tax for certain multinational groups has now passed the Senate.
The bills to implement tax changes to multinational enterprise groups with an annual global revenue of at least €750 million (approximately $1.2 billion) were passed by the Senate on Tuesday.
The Taxation (Multinational—Global and Domestic Minimum Tax) Imposition Bill 2024 and Treasury Laws Amendment (Multinational—Global and Domestic Minimum Tax) (Consequential) Bill 2024 are part of the government’s implementation of the OECD’s Pillar Two framework.
The Pillar Two rules aimed to address base erosion and profit shifting by multinational groups.
Treasurer Jim Chalmers said the legislation will help ensure multinationals pay their fair share of tax in Australia.
Chalmers said it was important that multinationals operating in Australia pay a reasonable amount of tax, which is what the legislation aimed to achieve.
“Minimum taxes are a key part of a coordinated global approach by the OECD to put a floor on tax competition and establish a fairer domestic and international tax system,” Chalmers said.
The legislation will allow Australia to apply a top‑up tax on a multinational operating in Australia if the multinational group pays less than a 15 per cent tax rate wherever it operates globally.
The Treasurer said multinational companies making a profit in Australia should pay tax on those profits in Australia.
“An international tax system where big multinationals pay their fair share is better for small businesses, better for taxpayers and better for the economy,” he said.
The ATO previously outlined that a minimum corporate tax rate of 15 per cent would “prevent a race to the bottom on corporate tax rates and would protect Australia’s corporate tax base”.
The global minimum tax rules allow Australia to apply a top-up tax on a resident multinational parent or subsidiary company where the group’s income is taxed below 15 per cent overseas.
The domestic minimum tax gives Australia the first claim on top-up tax for any low-taxed domestic income.
The ATO said that a large multinational company’s effective Australian tax rate may occasionally fall below 15 per cent.
“In these instances, the domestic minimum tax applies so that Australia collects the revenue that would otherwise have been collected by another country’s global minimum tax.”
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