Australian government consulting on changes to improve the efficiency of climate-related financial disclosures

The Australian government has opened a consultation on proposed reforms to Australia's mandatory sustainability reporting regime. Its objective is to reduce compliance costs while maintaining international alignment.

Signalled in the 2026-27 Australian Budget, these reforms focus on three key areas:

• Adjusting assurance settings to ensure proportionality and practicality;
• Improving the consistent application of the reporting requirements by clarifying key concepts; and
• Clarifying boundaries on supplier information requests.

 

PROPOSAL 1: ADJUST ASSURANCE SETTINGS

The Treasury has presented three potential options for reform to the assurance settings: 

• Maintain the limited assurance requirement, removing the transition to reasonable assurance entirely;
• Delay the transition to reasonable assurance from 2030 until 2035; or
• Require reasonable assurance only for sustainability reporting metrics that are relatively mature (eg for Scope 1 and 2 emissions, but not Scope 3). 

These proposals are unsurprising given how ambitious Australia's assurance settings have been compared to other jurisdictions and the challenges that reporting entities have experienced with getting ready for assurance.

 

PROPOSAL 2: IMPROVE CONSISTENCY IN THE APPLICATION OF EXISTING REQUIREMENTS

The Treasury is recommending further guidance and support for reporters around key terms of Australian Accounting Standards Board (AASB) S2, such as “undue cost or effort”. It is not proposing a legislative definition or changes to the AASB standards – both of which would involve delays.

Key elements of the proportionality mechanisms, including the 'undue cost or effort' test, have been the subject of much debate during Group 1. The standards do, however, need a level of flexibility to accommodate the different resources, sectors, and business-types of reporting entities. As such, more guidance, rather than a legislative definition, is likely to be the most workable outcome.

 

PROPOSAL 3: SET CLEARER BOUNDARIES ON VALUE-CHAIN INFORMATION REQUESTS

The introduction of a sustainability reporting regime often triggers a wave of information requests within reporting entities' value chains. This can create a compliance burden for suppliers and make it harder for reporting entities to collect, assess, and use the responses efficiently. 

To reduce this burden, the Treasury considered a standardised supplier data template, however, has moved away from this solution as it would prompt requests that the AASB S2 doesn't require. Instead, the Treasury is proposing to: 

• prepare additional guidance on what constitutes a reasonable request for information from a reporting entity’s value chain; and
• reduce supply chain administrative burdens through improving domestic emissions factors. 

 

ADDITIONAL OPTIONS TO STREAMLINE CLIMATE REPORTING

Two examples of potential opportunities to improve efficiency of disclosure requirements were identified in the consultation paper:

• Closer alignment between domestic reporting frameworks such as the National Greenhouse and Energy Reporting periods, and the AASB S2; and
• New registered company auditor practical experience requirements. 

 

NEXT STEPS FOR REPORTING ENTITIES

Deadline: Submissions close on Friday, 2 October 2026. The Treasury will then consider feedback and advise the government on the next steps. Where legislative change is needed, exposure draft legislation will be released for further consultation. The Treasury has not indicated when it will respond. 

Timing: Any changes introduced will be sequenced and so will not impact entities reporting for the 2026-27 financial year. 

Impact: The proposed reform does not include the changes to the Large Proprietary Company reporting thresholds that were separately announced in the 2026-27 Budget. It is intended to complement the future reform to change the reporting thresholds.

What to keep preparing for: The government is not seeking any views on changing the Scope 3 emissions reporting requirements. Entities can expect Scope 3 emissions reporting, and the expected changes to reporting thresholds, to remain in force, and should prepare accordingly.