Treasury opens consultation for tweaked global minimum tax rules

Earlier this month, Treasury opened consultation for tweaked global minimum tax rules designed to follow frameworks from the Organisation for Economic Co-operation and Development (OECD).

In 2024, the Australian government introduced a 15 per cent minimum tax for large companies, in line with the OECD Inclusive Framework. The rules have sought to ensure that large multinational firms pay a baseline level of tax across their global operations.

On 1 May, Treasury announced it was tweaking the law, Taxation (Multinational—Global and Domestic Minimum Tax) Amendment (2026 Measures No.2) Rules 2026, to maintain consistency with OECD rules.

Policymakers said the changes were minor, including clarifications to certain tax allocation rules and tweaks to ensure safe harbours worked as intended.

The proposed update also refined the allocation of income and taxes for flow-through and hybrid entities and modified the substitute loss carry forward (SLCF) rule for deferred tax assets (DTAs).

Under the proposed change, transitional country-by-country (CbC) safe harbour rules were extended by 12 months, allowing covered entities to access the safe harbour for fiscal years that began prior to 31 December 2027 and ended before 1 July 2029.

Amendments also ensured that there were three distinct types of SLCF DTAs that could arise, depending on the relevant entity's tax jurisdiction.

‘Category 1’ cases would arise when the jurisdiction required foreign source income to be offset by a domestic loss before foreign tax credits may be applied, allowing foreign tax credits to be carried forward to offset a tax liability in a subsequent year.

‘Category 2’ relates to similar situations, but for jurisdictions that permitted domestic source income from a later fiscal year to be recharacterised as foreign source income. That recharacterisation would allow foreign tax credits arising in that later year to offset tax liability relating to income included in GloBE income or loss for the later year.

Lastly, ‘category 3’ would arise as a combination of the first two scenarios, where a jurisdiction allowed a foreign tax credit to be carried forward as well as a recharacterisation of domestic source income in a later fiscal year, enabling foreign tax credits arising in that year to be used.

“The amendments … make categories 2 and 3 distinct and clarify that for these categories the applicable amount of SLCF DTA is the amount of the Constituent Entity’s domestic source income that the jurisdiction permits to be recharacterised as foreign source income in a later Fiscal Year and which relates to the amount of the tax loss offset by foreign source income, multiplied by the minimum rate,” the explanatory memorandum read.

Consultation is due to close next Friday, 22 May.