On 24 August 2026, the Australian Government (Treasury) released its Consultation Paper on proposed reforms to improve the efficiency of Australia’s mandatory climate-related financial disclosure (CRFD) regime. The proposals aim to reduce compliance costs for reporting entities while maintaining the quality, credibility and international comparability of sustainability reporting.
The consultation comes as Group 1 entities complete their first reporting cycle and Group 2 entities enter the regime for financial years commencing on or after 1 July 2026. It also follows the Government’s 2026–27 Budget announcement that it intends to increase the monetary thresholds for determining whether a proprietary company is ‘large ’. This change would remove some smaller Group 3 entities from mandatory sustainability reporting.
Alongside the consultation, the Government has released voluntary climate-related transition planning guidance, and the Australian Securities and Investments Commission (ASIC) has launched a package of educational materials and a sustainability reporting video series to help businesses prepare for sustainability reporting.
Key takeaways
- Treasury is consulting on three efficiency-focused reforms. The first reform is (a) adjusting assurance settings to be proportional and practical. The second is (b) providing clear guidance on key terms, concepts and proportionality mechanisms. The third is (c) setting clearer boundaries for value-chain supplier information requests.
- Treasury is not proposing to amend AASB S2 Climate-related Disclosures or the legislative definitions at this stage. Instead, it is seeking views on additional guidance and education, including on ‘reasonable and supportable information … without undue cost or effort’ and the skills-and-resources proportionality mechanism. It includes ‘no material climate-related risks or opportunities’ statements and related assurance issues.
- The Government has announced that it intends to raise large proprietary company thresholds from $50 million to $100 million in consolidated revenue and from $25 million to $50 million in consolidated gross assets. If implemented, the change will relieve medium-sized entities currently captured within the CRFD’s Group 3 threshold from their sustainability reporting obligations.
- The reforms under consultation will not affect reporting for the 2026–27 financial year. Entities should continue implementing the current regime and assess whether to submit views on areas that materially affect their compliance costs or reporting approach. Submissions are due Friday 2 October 2026.
- The Government’s new transition planning guidance is voluntary. It does not require an organisation to prepare a transition plan. It provides an Australian good-practice framework for entities developing or refreshing transition plans and the governance, strategy and implementation processes supporting climate disclosures.
Mandatory climate-related financial disclosures
As discussed in an earlier insight, mandatory CRFD obligations commenced on 1 January 2025 under Chapter 2M of the Corporations Act 2001 (Cth) (Corporations Act), with in-scope entities progressively phased into annual sustainability reporting. Entities must prepare sustainability reports in accordance with AASB S2 Climate-related Disclosures (AASB S2) and address governance, strategy, risk management, and metrics and targets, including greenhouse gas (GHG) emissions.
The focus of the consultation
Four key principles guide the consultation: (1) reducing compliance costs; (2) maintaining international alignment between AASB S2 and the International Financial Reporting Standards (IFRS) S2; (3) minimising disruption for reporting entities; and (4) reserving more systematic issues for the statutory review of the regime commencing after 1 July 2028.
Treasury wants to hear from reporting entities about how the current framework affects compliance costs and assurance arrangements.
The consultation paper seeks feedback on three main proposals. For reporting entities, the proposals have significant implications for current and planned assurance investments.
Proposal 1: Adjusting assurance settings
The current framework requires a phased transition from limited to reasonable assurance by 1 July 2030. Treasury is consulting on three options. Option (a) would make limited assurance the permanent requirement. Option (b) would delay the transition to reasonable assurance from 2030 to 2035, consistent with the EU approach. Option (c) would adopt a tiered model. Under that model, reasonable assurance would cover only Scope 1 and Scope 2 emissions. The tiered model would retain limited assurance for Scope 3.
This is likely to be the most consequential issue for reporting entities. Treasury wants information about assurance costs, stakeholder demand for reasonable assurance and the conditions for any longer-term transition. Entities that have invested in reasonable-assurance readiness should assess each option’s effect on their assurance roadmap, systems and controls.
Proposal 2: Consistent application of existing requirements
Treasury proposes additional guidance and educational resources on key terms and proportionality mechanisms in AASB S2. It does not propose changes to the standards themselves or legislative definitions. The guidance would clarify how proportionality mechanisms apply and when a Group 3 entity may conclude that it has no material climate-related risks or opportunities. It would also explain how to approach assurance when entities use those mechanisms or statements. It would cover concepts such as ‘reasonable and supportable information without undue cost or effort’. It would also cover actions ‘commensurate with the skills, capabilities and resources available to the entity’.
Proposal 3: Clearer boundaries for value-chain information requests
Entities must disclose Scope 3 emissions from their second reporting year. The ‘reasonable and supportable information … available without undue cost or effort’ qualification applies to those disclosures. Treasury is considering measures to reduce any unnecessary burden on value-chain partners, including
- additional guidance and practical examples on what constitutes a reasonable information request and how proportionality should apply, particularly for smaller businesses
- a greater role for Government in developing and collecting reliable domestic emissions factors, to improve access to secondary data and reduce reliance on primary data collection from supply chains in difficult-to-trace sectors.
Reporting entities should assess whether current supplier questionnaires, contractual data requirements and third-party collection processes are proportionate to the information needed for AASB S2 reporting. Value-chain businesses that are not reporting entities can show the frequency, cost and administrative impact of climate-data requests.
Additional proposals to streamline reporting
The consultation paper invites views on other matters, including:
- the practical effects of differences between National Greenhouse and Energy Reporting (NGER) and AASB S2 reporting frameworks, including whether existing mechanisms are sufficient to manage these challenges or alternatives, such as aligning reporting periods for Scope 1 and 2 GHG emissions with NGER reporting periods, could be considered; and
- potential reform to Registered Company Auditor practical experience requirements to support the availability, capability and cost of sustainability assurance practitioners.
New Government guidance on climate-related transition planning
On 24 August 2026, Treasury published its voluntary climate-related transition planning guidance (Transition Planning Guidance) to help organisations plan for the economy-wide net zero transition and the increasing physical impacts of climate change. The Transition Planning Guidance treats transition planning as an ongoing internal process and builds on the Transition Plan Taskforce Transition Planning Cycle, adapted for the Australian context.
The Transition Planning Guidance uses a four-stage cycle: (1) assess, (2) set ambitions, (3) plan actions and (4) implement. It includes practical examples and good-practice resources. The guidance does not require an entity to prepare a transition plan or change the mandatory disclosure requirements under AASB S2. However, AASB S2 requires entities to disclose information about any climate-related transition plan they have. This information explains how climate-related risks and opportunities affect an entity’s strategy and decision-making.
Corporate clients can use the Transition Planning Guidance to test their transition planning. It can show whether an entity integrates transition planning with its strategy, governance, capital allocation, risk management and stakeholder engagement. It can also show whether an entity has reasonable grounds for its public targets and transition statements and aligns them with mandatory sustainability disclosures. Organisations with a transition plan should benchmark it against the Government’s Transition Planning Guidance. Organisations without one can use the framework as a practical starting point where transition planning is relevant to their climate risks, opportunities or commitments.
ASIC training and capability-building materials
ASIC has released eight sustainability reporting educational modules and, on 25 August 2026, an eight-part video series. The materials cover the mandatory sustainability reporting framework under the Corporations Act and AASB S2. They cover climate science, physical and transition risks, climate-related opportunities, emissions accounting, scenario analysis, governance and risk management. ASIC recommends that Group 2 and Group 3 entities build capability and prepare early for sustainability reporting.
The materials offer educational guidance, not application or regulatory guidance, and should be used alongside the Corporations Act, AASB S2, ASIC Regulatory Guide 280 and relevant assurance standards.
What should businesses do now?
- Continue preparing under the current CRFD requirements: the consultation does not change 2026–27 reporting obligations.
- Review assurance roadmaps and planned investment: identify costs already incurred or committed and dependencies on the 2030 reasonable-assurance timetable. Assess whether a different assurance pathway would materially change implementation plans.
- Prepare evidence for a submission: Treasury wants practical examples and quantified costs and benefits relating to assurance, proportionality, value-chain data requests and reporting-period misalignment.
- Review Scope 3 data strategies and supplier engagement: test whether current value-chain information requests target a clear reporting need and remain proportionate, and identify where credible secondary data may suffice.
- Use the Transition Planning Guidance as a benchmark: assess whether current climate ambitions, actions, governance and capital allocation work together and support external disclosures and claims. Assess how any existing or future transition plan aligns with Treasury’s Planning Guidance.
- Build internal capability: use ASIC’s educational modules and videos to support directors, finance, legal, risk, sustainability, procurement and other teams involved in sustainability reporting. Many small and medium sized entities still need to build up their internal capability to meet the CRFD requirements.
Next steps
Submissions on Treasury’s consultation paper close on Friday 2 October 2026 and can be lodged through Treasury’s consultation hub. Treasury and relevant agencies will consider feedback received and advise Government on next steps. If legislation is proposed, Treasury states that it will release exposure draft legislation for further consultation.
Please contact our team to discuss the consultation, transition planning guidance or implications for your reporting and assurance arrangements.