Australia Mandatory Climate Reporting: Which Companies Are in Scope?

Australia's climate reporting regime stopped being theoretical a while ago. By early May 2026, 259 sustainability reports for December 2025 year-ends had been lodged with ASIC, real documents, with director sign-off and an assurance report attached. June year-end companies are filing this year. Group 2 begins on 1 July 2026, which is now.

The scoping question still trips people up, though, and for a specific reason: there isn't one threshold test. There are three separate gateways into the regime, and most guidance describes only the first. A company can be nowhere near the revenue and headcount numbers and still be caught because of its emissions profile or its assets under management.

Here's how scope actually works, when each group starts, and what the first report has to contain.

The Architecture

The legislation is the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024, passed in September 2024, which inserted mandatory climate reporting into Chapter 2M of the Corporations Act 2001. That placement matters, this sits inside the financial reporting framework, not alongside it as a voluntary sustainability exercise.

In-scope entities prepare an annual sustainability report containing climate statements made under AASB S2, lodged with ASIC alongside the financial report. AASB S2 imports IFRS S2 essentially wholesale, then adds 'Aus'-prefixed paragraphs with local requirements, most notably dual scenario analysis. ASIC supervises through Regulatory Guide 280.

Three Ways into Scope

The gateway provision is section 292A of the Corporations Act. You're in if you must prepare an annual financial report under Chapter 2M and you meet any one of three thresholds.

The corporate size threshold. This is the one everybody knows. The entity and those it controls meet two of three criteria on revenue, gross assets and employee numbers. The specific figures determine which group you land in, and therefore when you start.

The emissions threshold. The entity is a registered corporation with reporting obligations under the National Greenhouse and Energy Reporting Act 2007. Size is irrelevant here. A capital-intensive business with modest revenue and a small workforce can be pulled in purely on its NGER registration, which is exactly the case that gets missed.

The value of assets threshold. The entity is a registered scheme, registrable superannuation entity or retail CCIV holding $5 billion or more in assets. This is the asset owner gateway, and it operates independently of the size test. (For retail CCIVs, the $5 billion is measured across the whole CCIV, the sum of all sub-funds.)

Read those as alternatives, not cumulative requirements. Meeting any one puts you in.

The Three Groups and their Thresholds

Two of the three size criteria must be met for the corporate size gateway.

Note that the Group 3 size figures are the same as the large proprietary company thresholds, which is why the regime largely stops at genuinely small business, and why the Budget proposal discussed below matters so much to that cohort.

Who's Out

ASIC is explicit that entities without a Chapter 2M financial reporting obligation don't prepare a sustainability report. That excludes foreign companies registered under Division 2 of Part 5B.2 and entities incorporated overseas, small proprietary companies with no Chapter 2M obligation, registered charities outside Chapter 2M, and entities relying on ASIC relief from preparing a financial report.

One trap for multinationals: an Australian entity meeting the thresholds must report locally, even where its overseas parent already publishes group-wide climate disclosures. A global consolidated report doesn't discharge the Australian obligation.

What Goes in the Climate Statements

Four pillars, familiar to anyone who has done TCFD: governance, strategy, risk management, and metrics and targets. Within that, several requirements deserve specific attention.

Dual scenario analysis. This is an Australian addition and it is mandatory. You must test resilience against at least two scenarios, one consistent with 1.5°C, and one involving warming well exceeding 2°C, and disclose the anticipated financial effects of physical and transition risk. Single-scenario analysis doesn't satisfy AASB S2.

Scope 1, 2 and 3 emissions, with a one-year reprieve on the third. Scope 3 is not required in your first reporting period but becomes mandatory from the second. For Group 1 entities that means it is landing now, not later. AASB S2 allows an "undue cost or effort" exemption for measuring Scope 3, though the standard has left preparers and assurers with limited guidance on what actually qualifies, a gap the government has now said it will address.

Transition plans, where you have them, including emissions reduction targets and timelines.

No comparatives in year one. First-time reporters don't need prior period figures.

The Group 3 opt-out. Group 3 entities that conclude they have no material climate-related risks or opportunities can decline to prepare full disclosures, but this is not a quiet exit. They must publish a statement explaining how they reached that conclusion, with director sign-off, and it is subject to assurance like any other part of the report.

Assurance is not Optional, and it Starts Immediately

This is where Australia is stricter than most comparable regimes. There is no assurance-free first year. Assurance applies from the very first sustainability report, under two AUASB standards approved on 28 January 2025: ASSA 5000 General Requirements for Sustainability Assurance Engagements, the Australian adoption of the international ISSA 5000, applying to reporting periods beginning on or after 1 January 2025, and ASSA 5010, which sets the phasing timetable for financial years commencing 1 January 2025 to 30 June 2030. The auditor of your financial report also provides the assurance over the climate information.

The ramp works roughly like this: year one, limited assurance over governance disclosures, the strategy risks and opportunities disclosures, and Scope 1 and 2 emissions. Years two and three, limited assurance over the full report. From year four, reasonable assurance across all disclosures, reaching the Act's "end state" of reasonable assurance over everything for years commencing on or after 1 July 2030. Only one level, limited or reasonable, applies to any given item in any given year. One small relief: ASSA 5010 does not require the directors' declaration to be covered by the assurance report in year one.

Because Australia legislated early, ASSA 5000 bites for periods beginning 1 January 2025, well ahead of the international ISSA 5000's own effective date of 15 December 2026. Australian reporters have been under assurance from the first report while much of the world is still preparing for it.

Liability, and the Transitional Shield

Directors declare the sustainability report, and the Corporations Act's financial reporting penalty framework applies, including civil penalties.

Against that, there is a transitional protection. For three years from 1 January 2025, certain disclosures are treated as protected statements: Scope 3 emissions, scenario analysis, and transition plans. For these, no legal action other than criminal action or action by ASIC can be brought. In other words, the hardest and most forward-looking disclosures are shielded from private litigation during the bedding-in period, but not from the regulator, and not from criminal liability. RG 280 sets out where the modified liability settings don't apply.

What the May 2026 Budget Bhanged, and didn't

The Budget of 12 May 2026 proposed measures that will reshape the edges of this regime, and they've been widely misread as a retreat. They aren't.

The concrete proposal: raise the large proprietary company thresholds from $50 million to $100 million in consolidated revenue and from $25 million to $50 million in consolidated gross assets. The 100-employee threshold is unchanged. Companies falling below the new thresholds would no longer need to lodge an audited financial report, a directors' report, or a sustainability report at all. Because Group 3's criteria track the large proprietary company definition, this would meaningfully thin the Group 3 population.

The government also flagged consultation on three operational issues: clarifying how "undue cost or effort" applies in practice, recalibrating assurance settings to be proportionate and practical, and setting clearer boundaries around supplier information requests, with small business protection explicitly in mind.

What did not change is more important. There is no delay to the phasing. Group 2 still begins 1 July 2026. Group 1 entities are already reporting. The employee thresholds are untouched, AASB S2 stands, and none of this is law yet, the proposals require consultation and legislation.

The practical read: if you sit near the boundary, this could move you from Group 2 to Group 3, buying a year. If you're comfortably inside, it changes nothing. Either way, deciding to stand down on the strength of a Budget announcement would be a mistake.

Preparing the First Report

Three things consistently separate the companies that handle year one well from those that don't.

Board oversight has to exist before you can describe it. The governance pillar asks how your board and management oversee climate risk and how it feeds into decision-making. That's a description of something real, and one of the most common gaps is having no documented oversight to describe. It cannot be reverse-engineered in the weeks before lodgement.

Assurance changes what "good enough" means. Because an assurer is involved from report one, every figure needs to trace back to a source, meter readings, invoices, fuel records, with methodology and assumptions written down, and estimates flagged as estimates. This is the discipline financial data already lives under, applied to emissions.

Scope 3 takes longer than the relief lasts. The one-year deferral is setup time, not a holiday. Value chain data depends on supplier engagement, and suppliers need lead time to respond. Group 1 entities are discovering this in their second cycle right now; Group 2 entities have the chance to start before the deadline rather than after.

Worth adding: scope isn't static. ASIC has warned that entities outside the net today can be pulled in by acquisitions, growth, or structural change, and directors shouldn't take a wait-and-see approach. Assess your likely position over the next 12 to 24 months rather than just your current one.

One genuinely unresolved area: RG 280 gives limited clarity on how disclosures apply at fund entity level for superannuation trustees and fund managers, whether obligations sit at the fund, trustee, or asset level. ASIC has acknowledged more guidance is needed. If you're in that category, get advice rather than assuming.

Scoping and Readiness Checklist

1. Test all three gateways separately, corporate size (two of three), NGER registration, and the $5bn asset owner threshold. Any one puts you in scope.

2. Confirm your group and therefore your first reporting period: Group 1 (from 1 Jan 2025), Group 2 (1 Jul 2026), Group 3 (1 Jul 2027).

3. If you're an Australian subsidiary of a foreign parent, confirm you report locally, the group report doesn't discharge it.

4. Document board and management oversight of climate risk now, before the report needs to describe it.

5. Build Scope 1 and 2 data to assurance standard: traceable to source, documented methodology, estimates labelled.

6. Plan dual scenario analysis, 1.5°C and well exceeding 2°C, plus the anticipated financial effects.

7. Start Scope 3 supplier engagement in year one; it becomes mandatory in year two.

8. Engage your assurance provider early, assurance applies to the first report, not a later one.

9. If you're a Group 3 entity considering the no-material-risk position, prepare to document and assure that conclusion.

10. If you sit near a threshold, model the proposed Budget changes, but don't act on them until they're legislated.

Position as of July 2026. The Budget threshold changes and the climate disclosure efficiency measures are proposals requiring consultation and legislation, and were not law at the time of writing. Verify current requirements against ASIC's sustainability reporting pages and RG 280, and take professional advice on your entity's circumstances.

Sources

ASIC, AUASB, PwC Australia, Pitcher Partners, KPMG Australia, EY Australia, Chartered Accountants ANZ, Accounting Times, Australian Sustainable Finance Institute, Hamilton Locke, McCullough Robertson, Thomson Reuters Practical Law, Terrascope, Anthesis, Cority

This article is intended for general professional information and does not constitute legal, financial, or investment advice.