Australia consults on Pillar Two Side-by-Side and UPE safe harbours

The consultation is open until 26 November

The consultation closes on 26 November 2026. The proposals are not enacted law, and Treasury’s summary does not establish their detailed eligibility, commencement or transition rules. The development-specific page records an 11 November opening, although Treasury’s broader consultation index displays 12 November; this article uses the specific page’s timeline and preserves that metadata discrepancy.^[1]

The current regime already applies to large MNE groups

Australia’s existing regime is set out in the Taxation (Multinational—Global and Domestic Minimum Tax) Act 2024 and the Taxation (Multinational—Global and Domestic Minimum Tax) Rules 2024. An Applicable MNE Group generally has annual revenue of at least EUR750 million in at least two of the four preceding fiscal years. The income inclusion rule and domestic minimum tax apply for fiscal years beginning on or after 1 January 2024, while the undertaxed profits rule applies for fiscal years beginning on or after 1 January 2025.^[2][3]

Two safe harbours are proposed

Treasury proposes a Side-by-Side Safe Harbour allowing the US tax system to operate alongside the Pillar Two global minimum-tax rules, and a UPE Safe Harbour limiting where the undertaxed profits rule can apply in certain circumstances. The OECD package distinguishes the two: Side-by-Side relief can concern the income inclusion rule and UTPR for qualifying groups headquartered in an eligible regime, whereas the UPE Safe Harbour concerns UTPR exposure in the ultimate parent entity jurisdiction. Qualified domestic minimum top-up taxes remain outside that relief. Australia’s draft attachments must still be read before stating how those concepts would be transposed into Australian law.^[1][4]

The tranche includes technical amendments

The tranche also proposes technical changes requiring groups to track deferred tax liabilities subject to recapture, clarifying the allocation of controlled foreign company taxes where the CFC is tax-transparent, and recognising natural persons as owners of flow-through ultimate parent entities. These subjects correspond to the current Rules’ CFC and transparent-entity allocation provisions, deferred-tax recapture rules and flow-through UPE provisions.^[1][2]

Groups should map facts but await the instrument

In-scope groups, particularly those with a US ultimate parent or Australian constituent entities, should assess which entities and periods could be affected, check deferred-tax recapture data and CFC tax allocations, and consider responding through Treasury’s consultation website by 26 November. No new corporate tax return, registration or payment deadline is established by the consultation itself. Groups should monitor the final instrument for eligibility, elections, commencement, transition and any consequential filing changes.^[1][2][3]