Australia’s March 2026 Pillar Two technical amendments: an item-by-item analysis

On March 25, 2026, Australia issued the Taxation (Multinational—Global and Domestic Minimum Tax) Amendment (2026 Measures No. 1) Rules 2026, which apply to fiscal years starting on and after 1 January 2024. The purpose is to make amendments to Australia’s Pillar Two regime ensure the effective operation of the Domestic Top-up Tax in Chapter 2 of the Rules and to incorporate OECD guidance so that Australia’s implementation achieves qualified status. 

The amendments fall into five key areas:

-narrowing the Australian nexus for stateless entities;

-building a stateless-entity mechanism for JV structures;

-correcting covered-tax allocation for domestic hybrid and reverse hybrid cases;

-preventing Australia’s own QDMTT safe harbour rule from switching off its domestic minimum tax; and

-fixing collection mechanics for foreign-currency liabilities and Australian consolidation groups.

Those reflect various aspects of the OECD Administrative Guidance (eg the June 2024/2025 guidance address the hybrid and QDMTT issues targeted in the amendments).

Item 1 – paragraph 1-25(1)(c)

Item 1 is an amendment to the general foreign-currency rule in section 1-25. Before the amendment, paragraph 1-25(1)(c) excluded only amounts to which subsection (4) applied, meaning the generic rule in subsection (2) translated relevant amounts into the UPE’s reporting currency unless they fell within the Euro-threshold rules. Item 1 adds new subsection (6) to that carve-out, which separates liability-level conversion from computation-level conversion. As such, Australia provides that a top-up tax amount can still be computed under the ordinary GloBE currency rules, but the final Australian tax liability is subject to a distinct domestic conversion rule.

Item 2 – new subsection 1-25(6)

Item 2 inserts the new domestic conversion rule. If an IIR Top-up Tax Amount, Domestic Top-up Tax Amount or UTPR Top-up Tax Amount is denominated in a currency other than Australian currency, it must be converted into Australian dollars using one of three sources, all taken at the last day of the fiscal year: an RBA quote, the foreign central bank quote, or a publicly and commercially available market rate. This reflects paragraph 17.3 of the 2025 Consolidated Commentary, which allows jurisdictions to adopt any reasonable basis for translating top-up tax liabilities into local currency after the amount has been calculated in the MNE group’s presentation currency, including an average annual rate, a year-end rate, or a payment-date rate. Australia has chosen the year-end option.

Item 3 – subparagraphs 2-25(1)(b)(i) and (ii)

Item 3 narrows the stateless-entity limb of the Domestic Top-up Tax charging rule. Before the amendment, section 2-25(1)(b) applied the DMTT to a stateless constituent entity if it was created in Australia, if it was stateless under subsection 41(3) or 42(3) of the Act, or if it was a paragraph 19(1)(d) permanent establishment with an Australian place of business. That was broader than the Australian nexus the government wanted for DTT purposes. Item 3 replaces subparagraphs (i) and (ii) so that the relevant flow-through entity case is now confined to an entity that is both created in Australia and a Stateless Constituent Entity under subsection 41(3) of the Act. The PE limb remains separately addressed.

Under the Act, a flow-through entity is stateless under section 41(3) only where section 41(2) does not locate it and it is a constituent entity of an MNE group. By cross-referring specifically to section 41(3) and also requiring creation in Australia, item 3 eliminates any suggestion that Australia’s DTT should pick up every stateless flow-through entity merely because it is stateless under the Act. The Explanatory Statement is explicit that the intended perimeter is limited to Australian-created flow-through entities and Australian stateless PEs.

Item 4 – paragraph 2-25(3)(b)

Item 4 is the PE follow-through amendment. Before the amendment, section 2-25(3) shifted the DTT amount from a low-taxed PE to its non-Australian main entity where the PE was located in Australia. The revised paragraph (b) now extends that mechanism to a low-taxed constituent entity that is either located in Australia or is a Stateless Constituent Entity covered by subparagraph 2-25(1)(b)(iii). As such, item 4 ensures that a stateless PE with an Australian place of business is treated like an Australian PE for charging purposes: the DTT liability sits with the main entity, not with the PE itself.

This is a follow on from the item 3 amendment. As the DTT scope is narrowed so that certain stateless PEs are inside the domestic regime because of Australian nexus rather than ordinary location, the PE charging rule has to be expanded accordingly. If not, the Australian DTT would capture the PE in principle but not allocate the charge in a way that fits the Act’s PE application.

Item 5 – paragraph 2-25(5)(a)

Item 5 performs the same Australian-nexus correction for Joint Ventures and JV Subsidiaries. Before the amendment, section 2-25(5)(a) only applied where the JV or JV Subsidiary was located in Australia. That was insufficient for stateless JV cases because JV entities are not ordinary constituent entities of the actual MNE group; under section 6-75 they are treated as a separate deemed MNE group with the JV as UPE. Item 5 therefore adds two extra JV cases: an Australian-created flow-through entity treated as stateless under new paragraph 6-75(2)(c), and a stateless PE under paragraph 19(1)(d) with an Australian place of business, again via new paragraph 6-75(2)(c).

Item 6 – paragraph 2-25(7)(c)