Australia’s May 2026 proposed Pillar Two amendments: the CbCR safe harbour extension and related technical fixes

On May 1, 2026, Australia issued the draft Taxation (Multinational—Global and Domestic Minimum Tax) Amendment (2026 Measures No. 2) Rules 2026 for consultation. This includes a one-year extension to the Transitional CbCR safe-harbour and a number of technical amendments to Australia’s Pillar Two rules.

The Explanatory Statement states that the amendments would commence the day after registration, apply from January 1, 2024, and be subject to ordinary legislative-instrument disallowance and sunsetting rules.

Summary

The key reason for the amendment package is to ensure alignment with the OECD guidance (particularly aspects of the December 2023, June 2024 and January 2026 OECD administrative guidance) to ensure that Australia’s GloBE implementation maintains qualified status. The changes are based on OECD guidance and are intended to refine income and tax allocation for flow-through and hybrid entities, clarify certain tax-allocation rules, modify when substitute loss carry-forward deferred tax assets arise, and ensure safe harbours work as intended.

Extension of the Transitional CbCR Safe Harbour

The draft amendments to section 8-15 would extend the Transition Period by changing the relevant year references from 2026 to 2027 and from 2028 to 2029. In practical terms, this extends the Transitional CbCR Safe Harbour (TCSH) by 12 months, aligning Australia with the OECD January 2026 guidance to allow access for fiscal years that begin before 31 December 2027 and end before 1 July 2029.

The OECD’s January 2026 Side-by-Side Package explains the rationale: the Inclusive Framework agreed to a package of simplifications, including a permanent Simplified ETR Safe Harbour and a one-year extension of the Transitional CbCR Safe Harbour, to reduce compliance burdens while the global minimum tax is implemented. The guidance extends the TCSH to fiscal years beginning on or before 31 December 2027, excluding fiscal years ending after 30 June 2029, and provides that the 17% transition rate applies for fiscal years beginning in both 2026 and 2027.

For calendar-year groups, this means 2027 may remain within the Australian Transitional CbCR Safe Harbour period, provided the group and jurisdiction satisfy the relevant conditions. 

Permanent establishments: reallocation of taxes for simplified covered taxes