Australia’s government has moved to narrow the scope of its new sustainability reporting regime mid‑implementation, proposing higher size thresholds that would remove many smaller companies from mandatory audited climate disclosures from 2027.

The proposal, released alongside the 2026 Federal Budget on 18 May, would double the revenue and asset thresholds used to determine whether companies must publish audited annual financial and sustainability reports. Employee thresholds would remain unchanged.

If enacted, the change would materially shrink the final cohort due to enter Australia’s mandatory climate reporting regime, which has been rolling out in phases since 2025.

What is changing

Under the proposal, companies with revenue below A$100 million and assets below A$50 million would fall outside mandatory audited reporting, provided they do not meet two of the three size tests used to define reporting scope. The employee threshold would remain at 100.

This replaces the thresholds currently scheduled to apply from 2027, which were set at A$50 million in revenue and A$25 million in assets. Businesses that drop out of scope would no longer be required to lodge audited annual financial reports, directors’ reports or sustainability reports.

A political recalibration as implementation bites

The timing of the move reflects a broader political shift as climate disclosure moves from policy design toward day‑to‑day compliance. While the framework itself remains intact, the expansion to smaller companies has brought cost, complexity and liability concerns into sharper focus, particularly for private businesses and supply‑chain participants.

The 2026 Budget places strong emphasis on reducing regulatory burden and lifting productivity, and climate reporting is increasingly being assessed through that lens. By narrowing the reporting perimeter while keeping large and mid‑sized companies in scope, the government appears to be managing the political risk of a broader business backlash without reopening the core architecture of the regime.

The approach also limits the risk of climate reporting becoming a wider culture‑war issue. Keeping disclosure concentrated on systemically important companies allows the government to maintain investor credibility while easing pressure on smaller firms that are more politically vocal and less well‑resourced.

Implications for companies and investors

For investors and data users, the shift reduces disclosure coverage at the smaller end of the market. That is likely to increase reliance on estimates, engagement and value‑chain reporting to assess climate exposure beyond the largest firms.

The proposals now move into consultation and parliamentary debate. Climate‑related financial disclosure is firmly embedded in Australia’s reporting framework, but the boundaries are being redrawn as policymakers confront the practical limits of implementation.

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