Budget 2026–27: What Changed for AASB S2 Climate Reporting | NetNada

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Last night’s Federal Budget included a line item that a lot of finance teams will read as relief: the Government will consult on reforms to “improve the efficiency of climate-related financial disclosures,” and roughly 1,500 large proprietary companies will fall out of direct scope as the revenue threshold lifts from $50 million to $100 million.

If you’re a CFO who has been losing sleep over your first mandatory climate report, the temptation is to exhale and reshuffle the budget. We’d be careful about that. The reform package shifts where the work sits in the supply chain. It doesn’t remove it.

What actually changed

The Treasurer’s Whole-of-Government Regulatory Reform Agenda packages 14 legislative reforms targeting $780 million per year in reduced regulatory burden across the financial sector. Two of those reforms matter for climate reporting:

The large proprietary company thresholds double. Consolidated revenue moves from $50 million to $100 million. Consolidated gross assets move from $25 million to $50 million. The 100-employee threshold is unchanged. Companies that drop below the new thresholds no longer need to lodge an audited financial report, a directors’ report, or a sustainability report.

The Government will consult on three changes to the climate disclosure regime itself. It wants to clarify how “undue cost or effort” applies in practice — the get-out clause that lets reporters omit Scope 3 categories they can’t reasonably measure. It plans to recalibrate assurance settings so they’re proportionate to the size and maturity of the reporter. And it intends to set clearer boundaries on supplier information requests, with small businesses called out specifically.

That’s it. There is no change to who’s in Group 1, Group 2, or Group 3 by employee count. There is no delay to the phasing. There is no walking back of AASB S2. Group 1 entities are already reporting. Group 2 still begins in July 2026. Group 3 still follows in 2027.

Why this isn’t the win it looks like

The $780 million annual saving sounds significant. Spread across the affected population, per company, it isn’t. And the saving only materialises if the company in question (a) sits below the new thresholds, (b) has no listed parent, no foreign reporting obligation, and no major customer that needs Scope 3 data from it, and (c) actually winds back the reporting infrastructure it has already built.

Most mid-market companies fail at least one of those tests.

Here’s the mechanic that the headlines are missing. AASB S2 requires Group 1 and Group 2 reporters to disclose material Scope 3 emissions. Scope 3 includes purchased goods and services — category 1 in the GHG Protocol. A construction firm with $90 million in revenue may no longer have a direct reporting obligation under the new thresholds. But the ASX-listed developer it builds for does. And that developer needs emissions data from its suppliers to close out its own report.

The request doesn’t go away. It just arrives in a different inbox — usually procurement’s, often with a deadline attached to a contract renewal. The supplier still has to produce the number. The difference is that nobody is paying for a structured assurance pathway anymore. The data quality drops, the disputes go up, and the reporting entity ends up doing more reconciliation work, not less.

The Government has acknowledged this. The third reform in the climate package — setting boundaries on supplier information requests — exists precisely because policymakers can see the pull-through happening. The detail will matter. Until those boundaries are drafted and consulted on, anyone assuming they’re now exempt from supplier data requests is guessing.

What stays exactly the same

If you’re in Group 1, nothing has changed. You’re already reporting and your second cycle is underway.

If you’re in Group 2 — over 500 employees, or over $500 million revenue, or over $1 billion in assets — your first reporting period starts on 1 July 2026. The Government’s reform consultation has no bearing on that date. You have roughly 14 months to lock in data collection, materiality assessment, Scope 3 boundary decisions, and assurance arrangements. The recalibration of assurance settings may help at the edges, but you can’t plan around a consultation that hasn’t started.

If you’re in Group 3 — over 100 employees, or over $50 million revenue, or over $25 million in assets — your start date is still FY2027. The new $100 million revenue threshold for large proprietary company reporting applies to the Corporations Act lodgement obligation, not to the climate reporting trigger under the AASB S2 phasing. These are two different tests. A company can fall out of one and stay inside the other.

What CFOs should do this week

Three things.

First, run the new thresholds against your last three years of consolidated revenue and gross assets, with the 100-employee count alongside. If you’re clearly inside Group 2 or Group 3, nothing changes — keep moving. If you’re borderline, get clarity from your auditor on which obligations actually fall away and which don’t. Don’t assume.

Second, audit your customer base for Scope 3 exposure. Identify which of your top 20 customers are themselves Group 1 or Group 2 reporters. Those are the inbound supplier data requests you’ll be answering regardless of your own reporting status. The cost of being unprepared for that conversation is higher than the cost of being prepared.

Third, treat the consultation as a planning input, not a planning output. The Government will release more detail in coming months on “undue cost or effort,” assurance proportionality, and supplier request boundaries. None of that is reason to pause your existing programme. It’s reason to keep an eye on what gets locked in and adjust at the margins.

The reform is real. It’s also narrower than the press release suggests. Companies that were preparing for mandatory climate reporting yesterday should still be preparing today. The deadline didn’t move.

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Sources

• Australian Government, Whole-of-Government Regulatory Reform Agenda, Budget 2026–27 factsheet, 13 May 2026
• Australian Government, Budget Paper No. 2: 2026–27, 13 May 2026
• AASB S2, Climate-related Disclosures, effective for reporting periods beginning on or after 1 January 2025 (Group 1)