Climate reporting expands to mid-sized Australian firms

The Australian Federal Budget expanded mandatory climate disclosures under AASB S2, extending requirements to medium-sized reporting entities from 1 July 2026, based on defined size thresholds. 

AASB S2 is Australia’s mandatory climate-related financial disclosure standard issued by the Australian Accounting Standards Board. Australia’s phased rollout of mandatory climate reporting is based on IFRS S2, an international climate-related disclosure standard developed by the International Sustainability Standards Board. 

Group 1 entities began reporting from financial years starting 1 January 2025, generally covering businesses with at least two of the following: revenue of $500 million or more, assets of $1 billion or more, or 500-plus employees.  

Group 2 applies from financial years starting 1 July 2026. It covers entities meeting at least two of: revenue of $200 million or more, assets of $500 million or more, or 250-plus employees. It also captures certain large emissions reporters and asset owners with more than $5 billion under management. Group 3 commences from 1 July 2027 with lower thresholds. 

The regime applies to Australian reporting entities on a standalone basis, meaning foreign-owned subsidiaries may be in scope even if their parent group is not subject to equivalent climate reporting overseas. 

A first-year AASB S2 report requires disclosure across governance, strategy, risk management, and metrics and targets, including Scope 1 (your direct emissions) and Scope 2 (energy emissions) emissions. Scope 3 (indirect emissions in your value chain, including your suppliers and your customers' use of your products) emissions are phased in from Year 2. Limited assurance applies initially to Scope 1 and Scope 2 data.

Forward-looking disclosures, including scenario analysis and transition plans, are covered by a three-year safe harbour from civil litigation. The phased expansion brings medium-sized businesses into mandatory climate reporting for the first time, significantly widening compliance obligations across corporate Australia.

 Last updated: 20th May 2026

About the Author

Aaron Garry is the Managing Director of ABN Australia, where he leads the firm’s strategic growth and client service delivery. A Chartered Accountant with deep local and international experience, Aaron has supported hundreds of global businesses in establishing and growing their presence in Australia. His expertise spans market entry, compliance, and commercial advisory.