If a large customer has asked your business for emissions data, or your own first climate report is coming, the 2026-27 Federal Budget is worth a read. It proposes relief aimed at smaller businesses, and Treasury has now opened the consultation that would shape it. None of it is law, and the reporting timeline has not moved.
The one thing that is not moving
The reporting timeline is not being delayed. Mandatory climate reporting under AASB S2, the Australian standard for climate-related disclosures, is phasing in as scheduled. Group 1 covers first annual reporting periods beginning on or after 1 January 2025. Group 2 covers those beginning on or after 1 July 2026. Group 3 follows for those beginning on or after 1 July 2027.
The starting point is entities that already lodge annual financial reports with ASIC under Chapter 2M of the Corporations Act 2001. For those, three alternative tests decide whether AASB S2 applies, and any one is enough on its own:
- meeting at least two of three size metrics, based on revenue, assets and employees
- being a National Greenhouse and Energy Reporting reporter
- being an asset owner above the specified thresholds
The AASB points to ASIC Regulatory Guide 280 for the criteria, and that is the place to check a borderline year.
So the reforms being proposed are about how you comply. A separate threshold proposal, below, would change who is captured at all.
What is actually proposed
The 2026-27 Budget committed the government to consult on reforms to improve the efficiency of climate-related financial disclosures. That consultation opened on 23 August 2026 and closes on 2 October 2026. Three areas matter most for smaller businesses.
Clarifying “undue cost or effort”
AASB S2 requires a reporter to use all reasonable and supportable information available without undue cost or effort. It qualifies the information a reporter has to go and find, not the disclosures themselves: the AASB’s guidance is that an entity can neither ignore nor fabricate information that would inform its disclosure. The proposal names Scope 3 value-chain emissions specifically, and Treasury is consulting on clearer guidance on key terms and concepts.
Adjusting assurance settings
Assurance means having climate disclosures independently checked. The consultation puts the assurance rules on the table as a way to reduce compliance costs and keep settings proportionate. If that lands, the expectations on an early report from a smaller reporter would not match those on a mature multinational.
Setting boundaries on supplier information requests
This is the one aimed squarely at small business, and the one that reaches a business that is not itself a reporter. Large reporting entities need value-chain data, so they ask their suppliers for it, and a request can reach wider than the asking entity’s own obligation requires. The consultation frames this as reducing the burden of information requests across supply chains, so what counts as a reasonable request is open for comment until 2 October.
The threshold change that would move the most businesses
The Budget also proposes lifting the large proprietary company reporting thresholds. Consolidated revenue would go from $50 million to $100 million and consolidated gross assets from $25 million to $50 million, with the employee threshold unchanged at 100. Roughly 1,500 large proprietary companies would fall out of direct scope as the revenue threshold lifts.
This is a different test from the AASB S2 size metrics above, though both are built on revenue, assets and employees. This one decides whether a company lodges financial reports at all. The S2 metrics decide whether a company that already lodges is also caught by climate reporting.
The climate-disclosure changes sit inside a wider package of 14 legislative reforms targeting around $780 million a year in reduced regulatory burden across the financial sector. That saving is measured across the sector, not across small business, so it is not your own relief.
What this means while the consultation runs
- Position. Being a reporter in your own right, and being drawn in through a customer’s value chain, are two different problems. The three-part test above answers the first.
- Requests. A large customer’s request can reach wider than its own obligation requires. That scope is what the proposed boundaries reform says it will look at.
- Assurance. What proportionate settings would mean for a given engagement depends on the consultation.
- Timing. Submissions close on 2 October 2026.
The bottom line
None of this is settled. No draft legislation has been released, so the standard and the timeline as they stand are what apply.
If you want to work out where your business sits under AASB S2 and what a first report would involve, get in touch with the Augmented Audit Co team.