Climate-Related Financial Disclosures Bill
On 27 March 2024, Treasury released the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Bill). Schedule 4 of the Bill introduces a proposed new mandatory climate-related financial disclosure regime.
Under the proposed reforms, relevant entities will be required to submit an annual sustainability report as part of their annual financial reporting. These changes have been brought about to further Australia’s goal towards achieving net zero emissions as well as achieving its 2030 emissions target.
The draft legislation will amend the Australian Securities and Investment Commission Act 2001 and the Corporations Act 2001 to introduce ‘standardised, internationally-aligned reporting requirements for businesses’, in order to ensure there is transparency for investors and stakeholders.
The Government has proposed a phased approach to the implementation of the reporting requirements, dividing affected entities into three groups. Entities that are currently required to lodge financial reports under Chapter 2M of the Corporations Act 2001 and meet two of the three criteria in any one of the three categories below will be impacted by the proposed reforms:
- Group 1: Entities with consolidated gross revenue of $500 million or more, consolidated assets of $1 billion or more, or with more than 499 full-time equivalent employees. Entities that fall into Group 1 will be required to issue the first sustainability report for annual reporting periods starting 1 January 2025.
- Group 2: Entities with consolidated gross revenue of $200 million or more, consolidated assets of $500 million or more, or more than 249 full-time equivalent employees. Entities that fall into Group 2 will be required to issue the first sustainability report for annual reporting periods starting 1 July 2026.
- Group 3: Entities with consolidated gross revenue of $50 million or more, consolidated assets of $25 million or more, or more than 100 full-time equivalent employees. Entities that fall into Group 3 will not be required to issue the first sustainability report until annual reporting periods starting 1 July 2027.
Excluded from the reporting regime are:
- Small and medium-sized businesses that fall below the above thresholds or do not fulfill the above criteria.
- Businesses that are not required to file annual financial reports under section 2M of the Corporations Act 2001 or have been granted an exemption from the requirement to file an annual financial report by ASIC and registered Australian charities or not-for-profit organisations.
Next steps for the Bill
The Senate Standing Legislation Committee on Economics conducted an inquiry into the Bill and handed down its report on 3 May 2024. At the time of writing, the Bill was before the House of Representatives. While it is unclear when the Bill will be passed, the timing will determine the first reporting date for Group 1 entities.
Businesses subject to the mandatory reporting requirements are encouraged to prepare for implementation. As part of your preparation, talk to your EBM Account Manager about insurances to protect your business, such as statutory liability.
Draft legislation: Payment Times Reporting Act 2020 amendment
On 15 April 2024, Treasury released draft legislation to overhaul the Payment Times Reporting Act 2020 and introduce reforms that will increase pressure on big businesses to pay small businesses on time.
The overhaul implements the Government’s response to the independent review of the Act by the Honourable Dr Craig Emerson.
According to Treasury, it will simplify reporting, reduce regulatory burdens and increase pressure on large businesses that are slow to pay, including naming and shaming slow payers.
The proposed legislation introduces mechanisms that increase pressure on large businesses to improve their payment times to small businesses. These include:
- Expanding the Regulator’s functions to enable a range of activities to highlight good and poor payment conduct by large businesses, and undertake research on the causes and impacts of slow payment to small businesses.
- Consolidating reporting under Australian accounting standards so reported data gives a holistic view of payment times for corporate groups and enables meaningful comparisons of large businesses.
- Mechanisms to improve transparency and shine a light on slow payers. This includes potential enhanced disclosure by persistently slow paying large businesses.
The overhaul will also streamline reporting and remove inefficiencies and unnecessary burdens under the Act.
The legislation is expected to be introduced into the Parliament this year with amendments to the Payment Times Reporting Rules 2020 to follow shortly thereafter.
SMEs should talk to their EBM Account Manager about insurances available to protect income and other financial exposures.
