The 2026 Federal Budget set out a package of measures aimed at lifting productivity and easing regulatory load on Australian business. The measures relevant to finance and sustainability teams centre on financial reporting thresholds, group reporting simplification, and the operational mechanics of climate-related disclosures under AASB S2.
These changes are still proposals. Legislation has not been drafted, and timing is unconfirmed. Several of the measures have the potential to materially shift which entities sit inside or outside the mandated reporting net, so finance leaders sitting close to the existing thresholds, or operating inside complex group structures, should start mapping out the implications now.
Higher thresholds for large proprietary companies
The Government has proposed doubling two of the three monetary thresholds that define a "large" proprietary company under the Corporations Act. The employee headcount threshold stays where it is.
A company is treated as large if it meets at least two of the three tests. If enacted, the higher thresholds would reduce the number of proprietary companies required to lodge audited financial reports, directors' reports and (for Group 3 entities under the climate regime) sustainability reports with ASIC.
For finance teams sitting just above current thresholds, this is worth modelling. A company that drops below large proprietary status could be relieved of the full ASIC lodgement and audit cycle. The cost saving is real, with the obvious caveat that reduced external assurance has implications for lender covenants, investor confidence and board oversight. Some entities will choose to keep audited reporting in place voluntarily.
Simplified reporting for corporate groups
The second proposal targets wholly-owned subsidiaries inside corporate groups. Today, getting relief from lodging separate financial reports relies on the closed group arrangements set out in ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, including the use of a deed of cross-guarantee.
The Government wants to replace the deed mechanism with a simplified statutory process. This would reduce the legal and administrative overhead of setting up and maintaining cross-guarantee structures, which currently include drafting and lodging revised deeds when group composition changes, and complying with specific consolidation and disclosure conditions.
For CFOs of multi-entity groups, the practical effect is a cleaner path to consolidated reporting and fewer moving parts when the group structure changes through acquisitions, divestments or internal restructures.
Changes to climate-related disclosures
The Budget includes three measures aimed at making the AASB S2 climate disclosure regime more workable in practice.
The first is clarification of how key concepts apply, including the "undue cost or effort" exemption. AASB S2 allows entities to use this exemption when measuring Scope 3 emissions, but the standard has left preparers and assurers with limited guidance on what qualifies. Clearer rules will make it easier to defend reasonable scope decisions to auditors and reduce the risk of late-stage disagreement during assurance.
The second is a recalibration of assurance settings. Under the current regime, assurance obligations phase in over several years, with limited assurance applying to a defined subset of disclosures before reasonable assurance applies. The Government has signalled the settings should be "proportionate and practical," which points to adjustments in scope, timing or both.
The third is the most direct cost lever. The proposal sets clearer boundaries on supplier information requests, with explicit consideration for small business suppliers. Reporting entities have leaned heavily on supplier surveys to fill Scope 3 data gaps, and small suppliers have been carrying a disproportionate share of the response burden. Clearer boundaries will likely formalise when primary supplier data is required and when secondary data, including spend-based or industry-average factors, can be used.
What this means for finance and sustainability teams
The direction of travel is reduced burden at the margins. The underlying obligation under AASB S2 remains intact. Group 1 and Group 2 entities continue to report on the existing timeline. The changes will mostly affect Group 3 entities, smaller proprietary structures and the supplier chains feeding upstream disclosures.
Three actions are worth prioritising while the legislation is being drafted.
Review whether your entity sits above or below the proposed thresholds. If the changes push you out of mandatory reporting, model the cost saving against the value of voluntary disclosure to lenders, customers and investors.
Audit your Scope 3 data collection process against the existing AASB S2 supplier engagement settings. The proposed changes will likely reward entities that have a defensible methodology for selecting between primary and secondary data, with clear documentation of where exemptions have been applied.
Lock in audit-ready evidence now. Whatever shape the final assurance settings take, the underlying expectation is traceable data, version-controlled calculations and clear governance over methodology choices. Building that infrastructure is independent of how the final rules land.
Summary
- The 2026 Federal Budget proposes doubling the revenue and gross assets thresholds for large proprietary companies, with the employee headcount threshold unchanged. Entities that fall below the new tests may no longer need to lodge financial or sustainability reports with ASIC.
- Wholly-owned subsidiaries are set to get a simpler statutory pathway to consolidated reporting, replacing the existing deed of cross-guarantee process and reducing administrative overhead.
- The AASB S2 climate disclosure regime is being refined for workability, with clarifications on "undue cost or effort", recalibrated assurance settings, and clearer rules around supplier information requests.
- Finance leaders should model where their entity sits against the new thresholds, tighten Scope 3 data methodology and continue building audit-ready evidence regardless of how the final settings land.
How Avarni can help
Avarni is purpose-built carbon accounting software for AASB S2 compliance under the GHG Protocol. The platform automates emissions data collection, applies a defensible methodology across Scope 1, 2 and 3, and produces audit-ready disclosures with full traceability. Supplier engagement is structured around the proportionality the new rules are pointing toward, so reporting entities and their suppliers spend less time on surveys and more time on the data that moves the number.
If the proposed Budget changes affect your reporting obligations, Avarni gives finance and sustainability teams the control and evidence base to respond with confidence. Book a demo to see how the platform handles your scope, structure and supplier data.
