Do we have to do mandatory climate reporting?

You must prepare a sustainability report if you already lodge a financial report under Chapter 2M of the Corporations Act and you also meet one of the size, NGER or funds-under-management tests in section 292A. Both gates have to be passed: with no Chapter 2M obligation, section 292A never engages however large you are. Which of the three reporting groups you fall into decides which financial year is your first.

We are a private company with no external shareholders. Are we still captured?

Yes, if you meet the tests. The regime is not limited to listed entities, so any entity that must lodge a financial report under Chapter 2M and meets a section 292A test is captured. That includes large proprietary companies, unlisted public companies and Australian subsidiaries of foreign groups.

We are foreign-owned. Does the Australian entity report?

Yes, if the Australian entity has its own Chapter 2M financial reporting obligation and meets a section 292A test, because it is tested on its own consolidated numbers rather than the global group's. Foreign ownership is not a factor in section 292A. A parent's climate report prepared overseas does not automatically discharge the Australian obligation.

Glossary›Regulation, capture and thresholds / Regulation, capture and timing›Chapter 2M of the Corporations Act

Glossary term

Cluster B · B23

Tier 1 · differentiator

Chapter 2M of the Corporations Act

Definition

Chapter 2M of the Corporations Act 2001 is the part of the Act governing financial records, annual financial reports, sustainability reports, audit and lodgement. It is the gateway to mandatory climate reporting: an entity only prepares a sustainability report if it already has to prepare an annual financial report under Chapter 2M and meets a size, emissions or assets threshold.

Corporations Act 2001 (Cth) Chapter 2M

· Part 2M.3 as amended by the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 ·

In force

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In practice
What the assurer does with it
Commonly confused with
Sources
Related terms
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Cluster

B · Regulation, capture and thresholds / Regulation, capture and timing, 26 terms

In practice

Chapter 2M is where climate reporting was inserted, and understanding that placement answers most capture questions before they are asked. The regime was not built as a standalone environmental law. It was bolted onto the existing corporate reporting machinery, which means it inherits that machinery’s definitions, deadlines, director obligations and enforcement.

The chapter has a structure a controller already knows in part. Part 2M.2 covers financial records. Part 2M.3 covers the preparation of annual financial reports and directors’ reports, and now the sustainability report. Part 2M.4 covers appointment, removal and independence of auditors. Part 2M.6 deals with relief.

The consequence that matters commercially is a two-step capture test, and the first step is the one private companies skip. Step one is whether you have a Chapter 2M annual financial reporting obligation at all. Step two is whether you meet a section 292A threshold. Failing step one means the size thresholds never get applied. A large proprietary company that is grandfathered out of lodgement, or holds ASIC relief, can sit above every Group 3 number and still be outside the regime.

The second consequence is that the sustainability report is a statutory report, not a marketing document. It carries a directors’ declaration under section 296D, it must be assured, it is lodged with ASIC, and the same director liability framework that applies to the financial report applies to it.

What the assurer does with it

Capture assessment sits in engagement acceptance rather than in fieldwork. The assurance provider confirms the entity is genuinely captured, which financial year is its first reporting period, and which group it falls into, before scoping the engagement, because those three facts determine the assurance level required under ASSA 5010. What they ask for is the Chapter 2M basis: the consolidated revenue, gross assets and employee figures used for the section 292A test, agreed to the audited consolidated financial statements. They reject a capture assessment based on management accounts, single-entity figures, or a headcount with no stated basis. Where an entity has concluded it is not captured, the assurer for the financial report will still expect the reasoning to be documented, because a wrong answer is a non-compliance with the Act, not a disclosure error.

Commonly confused with

The NGER Act and the Safeguard Mechanism, which are separate obligations under separate legislation administered by the Clean Energy Regulator. NGER registration is relevant to Chapter 2M only because section 292A uses it as a capture trigger. An entity can be a NGER reporter and a Chapter 2M sustainability reporter at the same time, reporting different numbers on different deadlines to different regulators.