Australia Proposes Removing Smaller Companies from Sustainability and Financial Reporting Rules

Australia's government has proposed significant changes to its corporate reporting rules, including raising the threshold of companies required to publish audited financial and sustainability reports to exempt those with revenues under A$100 million and assets under A$50 million. The proposals were unveiled with the release of Australia's 2026 Budget alongside plans to consult on reforms aimed at reducing compliance burdens related to climate disclosures, including setting clearer boundaries on supplier information requests. The reforms form part of a broader regulatory simplification agenda that the government estimates will reduce overall regulatory burden by A$10.2 billion per year once fully implemented, marking one of the most significant recalibrations of Australian corporate disclosure policy in recent years.

 

Background to the Climate Reporting Regime

 

Australia introduced its mandatory corporate sustainability reporting regime in 2024, requiring large and medium-sized companies to disclose climate-related risks and opportunities alongside greenhouse gas emissions across the value chain. The reporting framework applies to all public companies and large proprietary companies required to provide audited annual financial reports that meet specific size thresholds. The regime began in 2025 with the largest companies, including those with over 500 employees, revenues above A$500 million or assets above A$1 billion, alongside asset owners with more than A$5 billion in assets.

The framework was designed to be rolled out in phases, with medium-sized companies brought in during 2026 at thresholds of 250 employees, A$200 million in revenue and A$500 million in assets. Smaller companies were due to begin reporting in 2027 under thresholds of 100 employees, A$50 million in revenue and A$25 million in assets. The proposed changes would significantly recalibrate this final phase of implementation by doubling the financial thresholds, materially reducing the number of companies brought into scope.

 

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Scope of the Proposed Changes

 

Under the new proposal, the smallest reporting tier would see its financial thresholds raised from A$50 million in revenue and A$25 million in assets to A$100 million in revenue and A$50 million in assets, while retaining the 100 employee threshold. Companies are considered within scope of the reporting obligations if they hit two of the three thresholds, meaning a meaningful number of smaller businesses would fall outside the regime entirely. According to the government's Budget summary, Australian businesses that cease to meet the new thresholds would no longer need to lodge an annual audited financial report, directors' report or sustainability report.

The decision to combine the financial reporting exemption with the sustainability reporting exemption is structurally significant, since it preserves the long-standing principle that sustainability disclosure follows the same boundary as financial disclosure. This approach maintains regulatory coherence but also means that climate disclosure scope is being narrowed alongside broader financial reporting obligations. The combined effect is to focus mandatory climate disclosure on a smaller pool of larger Australian companies relative to the original framework design.

 

Reducing Climate Reporting Burden and Supply Chain Requests

 

The budget also includes a commitment to consult on measures aimed at improving the efficiency of climate-related financial disclosures across the remaining in-scope companies. The proposed consultation will address how key concepts such as undue cost or effort apply in practice, adjustments to assurance settings, and the introduction of boundaries on supplier information requests. The supplier information element is particularly significant for smaller businesses that often face cascading data requests from larger corporate customers seeking value chain emissions data.

Setting boundaries on supplier information requests is intended to prevent reporting obligations from indirectly extending to companies that fall outside the formal scope of the regime. This element of the reform mirrors similar mechanisms in other jurisdictions, including the European Union's value chain cap under the recently revised European Sustainability Reporting Standards. The Australian approach seeks to balance the data needs of reporting companies with the practical capacity constraints of their smaller suppliers.

 

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Outlook for Australian Sustainability Disclosure

 

The proposed reforms reflect a broader international trend in which jurisdictions are recalibrating ambitious sustainability disclosure regimes in response to concerns about competitiveness and proportionality. The European Union's Omnibus simplification package and reforms in other markets have similarly narrowed the scope of mandatory reporting while preserving the underlying framework. Australia's proposals fit within this pattern, focusing mandatory disclosure on larger entities where stakeholder interest is highest while reducing the burden on smaller companies.

Whether the reforms will be implemented in the form proposed will depend on legislative passage and the outcomes of the planned consultation processes, with no timeline yet provided for the legislative work. Sustained execution on the climate disclosure regime for in-scope companies, combined with credible implementation of value chain cap mechanisms, will determine the broader integrity of Australia's sustainability reporting framework. The next phase of policy will need to balance proportionality with continued ambition to maintain the credibility of Australian corporate climate disclosure relative to international benchmarks.