GOVERNANCE BRIEFING

Position as at 30 October 2026

On 19 October 2026, the Australian Government released draft regulations proposing to increase the financial thresholds used to determine whether a proprietary company is classified as large under section 45A of the Corporations Act 2001 (Cth).

What changes are proposed to proprietary company reporting thresholds?

The proposal would increase the consolidated revenue threshold from $50 million to $100 million and the consolidated gross assets threshold from $25 million to $50 million. The employee threshold would remain at 100 full-time equivalent employees. A proprietary company would continue to be classified as large where it satisfies at least two of the three criteria.

Subject to the regulations being made, the revised thresholds would apply to financial years commencing on or after 1 July 2027.

How will the changes affect financial reporting?

Proprietary companies reclassified from large to small would generally cease to be subject to annual financial reporting, audit and lodgement obligations arising solely from their large proprietary company classification. Other statutory requirements, regulatory directions, contractual obligations and applicable exemptions must nevertheless be considered.

How will the changes affect mandatory climate reporting?

The changes would also have implications for Australia's mandatory climate-related financial disclosure regime.

Section 292A of the Corporations Act links the general corporate size thresholds for mandatory sustainability reporting to the thresholds prescribed for proprietary companies under section 45A.

What do the proposals mean for Group 3 entities?

Accordingly, the proposed increases would reduce the number of entities satisfying the general Group 3 sustainability-reporting size test, which applies from financial years commencing on or after 1 July 2027.

ASIC has confirmed that some entities previously expecting to report under Group 3 may no longer be required to prepare annual financial or sustainability reports.

However, the changes would not abolish Group 3, alter the higher Group 1 and Group 2 size thresholds, or remove the separate reporting gateways applicable to certain NGER corporations and large asset owners.

Eligible Group 3 entities that remain subject to mandatory reporting may, under section 296B, prepare simplified climate statements if they have undertaken the required assessment and determined that they have no material climate-related financial risks or opportunities.

What about registered charities and other not-for-profit organisations?

ACNC-registered charitable companies are generally outside the Chapter 2M mandatory sustainability-reporting regime because of special statutory arrangements, although particular exceptions should be considered.

Non-charitable public companies limited by guarantee may be subject to mandatory sustainability reporting where they are required to prepare a Chapter 2M financial report and satisfy the applicable sustainability-reporting thresholds.

Importantly, while the proposed increases may alter whether such a company meets the general sustainability-reporting size test, they do not change the separate financial reporting framework applicable to companies limited by guarantee.

What should boards and company secretaries do now?

Boards and management should reassess their expected reporting obligations against the proposed thresholds, considering consolidated revenue, assets and employee numbers, corporate structure, applicable statutory reporting requirements and any other relevant reporting gateways.

Entities potentially relieved from mandatory reporting should also consider continuing information requirements imposed by lenders, customers, investors, funding arrangements and larger entities within their value chains.

Until the amendments are made, the existing statutory thresholds continue to apply.

David Cantrick-Brooks FGIA FCG, Principal & Director of Governance in Action Pty Ltd, would be pleased to assist with enquiries. Please feel free to reach out via LinkedIn or via gia.net.au.

AI-assisted tools and techniques were used here to support the research, drafting and editing of this publication. Responsibility for the final content rests with David Cantrick-Brooks.

Whilst accounting and legal terms and references may be contained in this publication, it does not constitute or purport to be or represent accounting or legal advice of any kind – whatsoever.Readers should seek their own independent professional advice.

Consultation closes on 2 November 2026 (which is a surprisingly short consultation period).