Global and Domestic Minimum Tax Compliance: ATO Releases Draft PCG 2025/D3

On 16 July 2025, the ATO released draft Practical Compliance Guideline PCG 2025/D3 for public consultation. The guideline outlines the ATO’s transitional administrative and compliance approach with respect to lodgement and penalty enforcement for entities subject to the Global and Domestic Minimum Tax (Minimum Tax) under the Australian Global Anti-Base Erosion Model Rules (GloBE) Pillar Two rules. 

Comments on the draft PCG are due by 29 August 2025. Once finalised, the PCG is proposed to take effect from 1 January 2024 and will apply to lodgments for fiscal years commencing on or before 31 December 2026 and ending on or before 30 June 2028 (the Transition Period).

Recap of the GloBE Rules

Multinational Enterprise (MNE) Groups, including Australian Constituent Entities, that meet the EUR 750 million consolidated revenue threshold in at least two of the four fiscal years preceding the test year will generally be subject to the GloBE rules.

Where the global effective tax rate of the MNE Group is below the minimum 15% tax rate, the rules may impose top-up tax under three mechanisms.

1. the Income Inclusion Rule (IIR), which applies to the parent entity

2. the Domestic Minimum Tax (DMT), which applies to low-taxed profits in Australia; and 

3. Under-taxed profits rule (UTPR), which acts as a backstop where the IIR does not apply.

The IIR and DMT apply to fiscal years starting on or after 1 January 2024, while the UTPR applies to fiscal years starting on or after 1 January 2025.

Lodgment Obligations for Australian Entities under Minimum Tax

Australian entities subject to the Minimum Tax are required to lodge the following: 

• the GloBE Information Return (GIR),

• the Foreign Notification Form (FNF)

• the Australian IIR/UTPR tax return (AIUTR),

• the Australian DMT tax return (DMTR).

The FNF, AIUTR, and DMTR are consolidated into a single lodgement known as the Combined Global and Domestic Minimum Tax Return (CGDMTR).

The due date for lodgement and payment is 18 months after the end of the MNE Group’s GloBE Transition Year and 15 months after the end of subsequent fiscal years. 

Each Australian Group Entity must lodge a GIR unless a Designated Local Entity (DLE) is nominated to lodge on behalf of all entities under a one-in, all-in approach.

The GIR may alternatively be lodged in a foreign jurisdiction by the Ultimate Parent Entity (UPE) or Designated Filing Entity (DFE), provided the jurisdiction has a Qualifying Competent Authority Agreement (QCAA) with Australia and the GIR is lodged by the due date.

If the GIR is lodged in a foreign jurisdiction but not exchanged with the ATO, the ATO may require Australian entities to lodge the GIR locally within 21 days of receiving written notice. 

All Australian Group Entities must lodge an FNF, although a DLE may be appointed to lodge on behalf of all entities.

Similarly, MNE Groups may nominate a DLE to lodge the CGDMTR.  Where a DLE is appointed, all entities are deemed to have lodged at the time the DLE lodges.  If the DLE lodges late, all entities are deemed to have lodged late.

The Commissioner has discretion to defer the due date for the AIUTR and DMTR, but not for the FNF.

Penalties under the Minimum Tax Regime

Administrative penalties may apply where entities subject to the Minimum Tax regime fail to meet key compliance obligations. These include:

1. Failure to Lodge (FTL): Penalties arise when required forms are not lodged on time, including cases where a Designated Local Entity (DLE) fails to lodge on behalf of the Group Entities, or where the GloBE Information Return (GIR) is not lodged in Australia or a qualifying foreign jurisdiction.

2. False or Misleading Statements: Penalties apply for making false or misleading statements, adopting a position that is not reasonably arguable, or failing to provide a return, notice, or document that results in a default assessment.

3. Failure to Maintain Records: Entities may be penalised for not keeping adequate records to support their tax positions and compliance with Minimum Tax obligations.

The base penalty amount (BPA) for these infractions is aligned with the framework applicable to Significant Global Entities (SGEs). Specifically:

• FTL penalties are calculated at 500 times the BPA

• Penalties for false or misleading statements, or failure to provide required documentation, are doubled relative to standard administrative penalties

ATO’s Transitional Compliance Approach

The ATO’s compliance approach during the Transition Period is aligned with the OECD’s transitional penalty relief framework.

During the Transition Period, penalties or sanctions will generally not apply in connection with the filing of the GloBE Information Return (GIR), provided the MNE Group has taken reasonable measures to correctly apply the GloBE rules.

The ATO will adopt a ‘soft-landing’ approach to penalty enforcement where the MNE Group can demonstrate that it has acted in good faith and made genuine efforts to understand and comply with its lodgment obligations.

However, the ATO will not be providing blanket penalty concession to all MNE Groups during the Transition Period. The onus remains on MNE Groups to substantiate that reasonable measures have been taken.

The ATO expects that the tax functions of Australian Constituent Entities are aware of these expectations and are actively developing systems and capabilities to ensure compliance with the relevant reporting and lodgment obligations.

Examples of reasonable measures include:

• Timely preparation and planning for lodgment of returns

• Maintaining adequate documentation to support positions taken

• Proactively engaging with the ATO where delays are anticipated

• Promptly identifying and correcting errors, including notifying the ATO when amendments to the GIR or CGDMTR are required

MNE Groups may refer to paragraph 48 of PCG 2025/D3 for examples of acceptable evidence, such as internal policies, implementation plans, and system updates.

Transitional Compliance Approach – Remission of Penalties and Lodgment Deferrals

As part of the ATO’s transitional compliance approach to the Minimum Tax regime, MNE Groups will be given the opportunity to request remission of any Failure to Lodge (FTL) penalties before such penalties are posted to their Client Account in ATO systems.

The ATO will generally grant full remission where MNE Groups proactively engage and provide evidence that they have taken reasonable measures to comply with their lodgment obligations.

The ATO acknowledges that unforeseen circumstances — such as newly enacted legislative amendments requiring significant updates to reporting systems — may result in lodgment delays. In such cases, the grounds for remission outlined in PS LA 2011/19 will be considered.

Early engagement is encouraged to allow the ATO to take appropriate action and support MNE Groups through the transition.

In relation to lodgment deferrals and suspension of enforcement action, the ATO will have regard to PS LA 2011/15.  Where delays are anticipated, the Designated Local Entity (DLE) should request:

• Suspension of lodgment enforcement action for the GIR and FNF; and

• Lodgment deferral for the AIUTR and DMTR.

While the ATO does not have discretion to defer the lodgment due date for the GIR or FNF, it may agree to suspend enforcement action during the Transition Period by temporarily withholding compliance action on overdue lodgments.

Requests for lodgment and payment deferrals must be made separately, and will be assessed with regard to factors such as avoidance, fraud, evasion, or poor compliance history.

Implications of Deferral or Suspension

If granted:

• FTL penalties for deferred lodgments are calculated from the new due date

• FTL penalties during suspension may accrue from the original due date until lodgment

During the Transition Period, the ATO will generally remit FTL penalties in full if obligations are met before the suspension lapses. While each entity may be liable for separate penalties, the ATO will typically reduce this to:

• One FTL penalty for the MNE Group’s CGDMTR

• One FTL penalty for the MNE Group’s GIR

However, penalties may still apply where MNE Groups fail to undertake reasonable measures.

The ATO outlines six illustrative scenarios in PCG 2025/D3 that clarify when failure to lodge (FTL) penalties will or will not be imposed during the Transition Period under the Minimum Tax regime.

Summary

Draft PCG 2025/D3 reflects the ATO’s commitment to supporting MNE Groups through Australia’s implementation of the GloBE rules, consistent with the OECD’s recommended transitional approach. While the guideline provides for a concessional compliance framework, it also sets a clear expectation: taxpayers must take reasonable measures and act in good faith to understand and meet their lodgment obligations under the Minimum Tax regime.

Where genuine circumstances prevent timely lodgment, the ATO may exercise its discretion to grant lodgment deferrals, suspend enforcement action, or remit penalties — provided the taxpayer can demonstrate proactive engagement and reasonable compliance efforts.

It is critical that taxpayers establish who is responsible for lodging the GloBE Information Return (GIR) — whether via the Ultimate Parent Entity (UPE) or Designated Filing Entity (DFE) under a Qualifying Competent Authority Agreement (QCAA), or through a Designated Local Entity (DLE) in Australia. 

For the Foreign Notification Form (FNF), AIUTR, and DMTR, taxpayers should confirm whether a DLE will lodge on behalf of all Australian Group Entities under a one-in, all-in approach. This will help streamline the lodgment process and reduce administrative risk.

How we can help 

At PKF, we are assisting clients across sectors to prepare for the Australian Minimum Tax requirements. If your group is impacted, reach out to your local PKF adviser to discuss tailored solutions and implementation strategies.