While the 2026–27 Federal Budget was dominated by major tax reform announcements, it also includes a set of measures aimed at reducing regulatory burden and improving the practicality of reporting and assurance requirements. These changes will be of particular interest to preparers, directors and auditors navigating evolving financial and sustainability reporting obligations.

Higher thresholds for large proprietary companies

The Budget confirms the Government will seek legislative reform raising the size thresholds that determine whether a proprietary company is classified as “large” for financial reporting purposes. A company is classified as large if it meets two of three thresholds.

The financial thresholds are planned to increase from:

• $50 million to $100 million in consolidated revenue, and
• $25 million to $50 million in consolidated gross assets.

No change has been proposed for the threshold of 100 employees. 

Entities that fall below the new thresholds as a result of this change will no longer be required to lodge:

• an annual audited financial report,
• a directors’ report, or
• a sustainability report.

This measure is intended to relieve reporting burden for businesses that have grown in nominal size over time, without a corresponding increase in complexity or public interest risk. For affected entities, the change represents a significant shift in reporting and assurance obligations. Directors and management will nevertheless need to consider broader questions around governance, financing arrangements and stakeholder expectations where audited financial information has historically been provided.

Climate reporting: maintaining the fundamentals, improving how it works in practice

The Budget also signals an important recalibration of climate related financial disclosure, with the Government committing to consult on ways to improve efficiency and reduce burden while retaining core reporting requirements.

For entities already captured by the regime—particularly group 2 and group 3 entities (excluding those outside the revised reporting or NGERS thresholds) - the message remains to continue preparing for reporting and assurance requirements, notwithstanding refinements that may emerge.

The Budget identifies three proposed areas for reform, all of which warrant close attention:

• Clarifying the practical application of key concepts, including how the “undue cost or effort” threshold should be applied in practice, to improve consistency and reduce uncertainty
• Adjusting assurance settings to ensure they are proportionate and operationally practical, particularly during early implementation years
• Setting clearer boundaries around supplier and value chain information requests, to help manage costs and complexity—especially for small businesses indirectly impacted through reporting by larger entities.

These proposals are sensible and reflect issues already emerging as the regime moved from policy design to implementation. Clearer guidance on value chain information is particularly important to ensure small and medium sized businesses are not disproportionately burdened by data requests that exceed what is necessary to meet reporting objectives.

CA ANZ looks forward to engaging with Treasury through the forthcoming consultation process to help ensure these refinements strike the right balance between decision useful disclosure and proportional, practical implementation.

Simplifying reporting relief for corporate groups

The Budget also includes a measure to simplify financial reporting relief for eligible group entities, without weakening protections for those dealing with group companies.

The reform will replace existing deeds of cross guarantee with a simplified statutory process, making it easier for corporate groups to access relief while retaining appropriate safeguards.

If designed carefully, this change has the potential to materially reduce legal and administrative complexity for groups, while improving transparency and confidence in how relief operates.

Broader review of non financial reporting

Beyond climate disclosures, the Government has reiterated its commitment to reviewing non financial business reporting requirements more broadly, with the aim of ensuring obligations are efficient, fit for purpose and aligned with policy intent.

This work will sit alongside a new Productivity Commission inquiry into business dynamism, which will examine regulatory barriers to innovation and growth—particularly for young and growing firms. Reporting requirements, including flow on impacts through value chains, are expected to form part of this wider discussion.

Funding for External Reporting Australia

Budget Paper No. 2 also allocates $4.8 million over four years from 2026–27 to finalise funding arrangements for External Reporting Australia, the new body that will replace the AASB, AUASB and the Financial Reporting Council. As the legislation has not yet passed establishing the new body, funding is also provided this year for the Offices of the AASB and AUASB.

The additional funding includes additional resourcing to support climate sustainability reporting, reflecting the increasing scope and complexity of external reporting and assurance reform. The establishment of External Reporting Australia represents a significant institutional change for Australia’s reporting framework, with important implications for standard setting, oversight and due process.

What businesses and practitioners should do now

Most of the reporting and audit measures announced in the Budget are not finalised and will be subject to further consultation and/or legislative design. In the meantime:

• entities below the new proprietary company thresholds and their auditors should assess how these changes will impact them, including governance and stakeholder expectations
• group 2 and group 3 entities should continue preparing for climate reporting and assurance, noting the fundamentals are unchanged but there will likely be some reprieve from more problematic aspects
• businesses across the value chain should monitor consultation outcomes, particularly where supplier data requests may be refined.

CA ANZ will continue to engage closely with Treasury and will be looking to your views to help shape the profession’s perspective as these reforms progress, to support outcomes that reduce unnecessary burden while maintaining confidence in Australia’s reporting and assurance system.