Australia’s Modern Slavery & Climate-Related Reporting Thresholds Are Potentially Changing
Two of Australia’s most significant corporate ESG-related reporting frameworks are potentially moving in different directions at the same time.
On one hand, the Australian Government has proposed raising the threshold for sustainability and financial reporting (climate-related reporting), potentially exempting companies below certain size criteria from mandatory obligations. On the other, the independent statutory review of the Modern Slavery Act 2018 has recommended lowering that framework’s reporting threshold, which would bring a significant number of additional companies into scope. The government has not yet legislated the modern slavery change, but has signalled it will be revisited.
This article explains what each change means, why the two frameworks are heading in opposite directions, and what companies sitting below or near these thresholds should be doing now.
The Sustainability Reporting Threshold Change
Australia’s mandatory sustainability reporting regime which has been introduced under the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 and implemented through Australian Accounting Standards Board Standard S2 (AASB S2), is currently rolling out in three groups based on company size.
Group 1 companies (those with 500 or more employees, A$1 billion or more in assets, or A$500 million or more in revenue) commenced reporting for financial years beginning on or after 1 January 2025. Group 2 and Group 3 companies face later start dates.
The government’s proposed threshold change, announced as part of the 2026 Budget, would exempt companies with annual revenues below A$100 million and assets below A$50 million from sustainability and financial reporting requirements. The intent is to reduce compliance burden on smaller businesses, including by reducing the flow of supplier information requests from larger reporting entities down their supply chains.
The proposal is subject to consultation and has not yet been legislated. For companies currently planning for Group 2 or Group 3 reporting obligations, it is worth monitoring the outcome of that consultation before making significant changes to their reporting preparation timelines.
The Modern Slavery Threshold Change
The Modern Slavery Act 2018 currently requires entities with annual consolidated revenue of at least A$100 million that operate in Australia to publish an annual Modern Slavery Statement. This threshold currently captures approximately 3,000 entities.
The independent statutory review of the Act, completed in May 2023 and known as the McMillan Review, made 30 recommendations. Among the most significant was a proposal to lower the reporting threshold from A$100 million to A$50 million, which is a change that would bring an estimated additional 2,393 entities into scope. The review also recommended introducing mandatory due diligence obligations, civil penalties for non-compliance, and the establishment of a federal Anti-Slavery Commissioner (a role that has since been created through the Modern Slavery Amendment (Australian Anti-Slavery Commissioner) Act 2024).
The Australian Government’s formal response in December 2024 agreed in full to 13 of the 30 recommendations, agreed in principle to 12, and noted 5. The threshold reduction was not committed to in that response, with the government indicating it would be revisited in future reviews. However, the direction of travel is clear in that a lower threshold is a matter of when rather than if.
Two Frameworks, Opposite Directions
The contrast between the two frameworks is notable. At the same moment the government is proposing to reduce the number of companies required to report on climate and broader sustainability matters, the modern slavery framework is heading toward capturing more companies, not fewer.
There is a logic to this, even if the combination feels counterintuitive for businesses trying to plan. Climate-related financial disclosure is a complex, technically demanding exercise which includes scenario analysis, Scope 1, 2 and 3 emissions measurement, governance documentation and assurance requirements all add up to a substantial compliance effort, particularly for companies without existing sustainability reporting infrastructure. Easing that burden for genuinely small businesses is a reasonable policy position.
Modern slavery reporting, while still requiring genuine effort, is a different type of obligation. It centres on supply chain transparency and the identification of human rights risks which is an exercise that is proportionate to the size of a company’s operations and supply chain, and one where the social harm being addressed is immediate and direct.
What the Data Collection Challenge Actually Looks Like
For companies approaching these thresholds for the first time, the reporting document itself is rarely the hardest part. The more significant challenge is the underlying data — identifying what information the company holds about its supply chain, understanding where gaps exist, and building the internal processes to collect and verify what is needed on an ongoing basis.
The availability of peer reports has made this somewhat more manageable than it was in the early years of either framework. Companies can now review the Modern Slavery Statements and sustainability reports already published by peers and comparable businesses to understand the reporting structure, the level of detail expected, and where other companies have identified risks or gaps.
Stakeholder engagement, while often cited as a challenge, tends to be more manageable than expected for compliance-driven reporting, because management understands that these are regulatory requirements rather than discretionary exercises. The harder conversation is usually internal: agreeing on who owns the data, who is responsible for the process, and how reporting obligations will be resourced on an ongoing basis.
Our View
The tension between these two frameworks moving in opposite directions is genuinely confusing for companies trying to plan their compliance programs. However, there may be a strategic logic to it that is worth considering.
Both climate change and modern slavery are significant issues, environmental and social, respectively, that warrant serious corporate attention. But they operate on different timelines of impact. The harms associated with modern slavery are immediate and direct. The heaviest physical and economic impacts of climate change, while already being felt in some areas, have a longer trajectory to their most severe consequences. Sequencing the compliance burden in a way that asks smaller companies to focus first on modern slavery may reflect an implicit acknowledgement of that difference, and may allow companies to build their reporting capability progressively rather than across multiple complex frameworks simultaneously.
For companies currently sitting below both thresholds and growing, the question of when these obligations will apply is less important than being ready when they do. A desktop review of both frameworks (the Modern Slavery Act 2018 and the AASB S2 climate reporting requirements) alongside a review of peer reports already published, gives management a realistic picture of what is involved. From there, a board or management education session on both topics tends to be the catalyst that converts awareness into action which typically leads to the formation of a working group charged with beginning the data collection process.
Starting that work before the obligation formally applies is not just prudent, it is likely to result in a meaningfully better first report, and a less stressful path to compliance.
Sources
- Australian Government, Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024, treasury.gov.au
- Australian Accounting Standards Board (AASB), AASB S2 Climate-related Financial Disclosures, aasb.gov.au
- Australian Government, 2026-27 Budget — regulatory relief for small business, budget.gov.au
- Attorney-General’s Department, Modern Slavery Act 2018 and statutory review response, December 2024, ag.gov.au
- McMillan Review, Statutory Review of the Modern Slavery Act 2018, tabled May 2023
- Modern Slavery Amendment (Australian Anti-Slavery Commissioner) Act 2024
- Elker, Modern Slavery Reporting Requirements in Australia, updated April 2026, elker.com
- Anthesis Global, Modern Slavery Act Australia, updated 2025, anthesisgroup.com
- Norton Rose Fulbright, Modern Slavery Act: What Businesses in Australia Need to Know, 2026, nortonrosefulbright.com
Anabranch ESG Advisory provides independent advice on ESG strategy, climate disclosure, and sustainability reporting. The information in this article is general in nature and does not constitute legal or financial advice.
