What is the modified liability period and what does it protect?

For financial years commencing between 1 January 2025 and 31 December 2027, statements in your sustainability report about Scope 3 emissions, scenario analysis and transition plans can only be actioned by ASIC or in criminal proceedings. Broader forward-looking climate statements had the same protection only for financial years commencing during 2025. Both windows are closed-ended and neither renews.

Are directors personally liable for climate disclosures?

Directors carry their ordinary care and diligence duties in relation to the sustainability report, and they sign a declaration about it. A temporary and partial protection applies to some forward-looking content, but it is narrower than it is usually described and it is closing. This is the one answer that should be read together with your own legal advice.

Do we have to report Scope 3 in year one?

No. AASB S2 gives first-time reporters relief from disclosing Scope 3 greenhouse gas emissions in their first annual reporting period, and Scope 3 is required from the second year. Taking the relief in year one is normal, but the supplier data work needs to start in year one anyway.

Glossary›Regulation, capture and thresholds / Regulation, capture and timing›Modified liability / limited immunity period

Glossary term

Cluster B · B11

Tier 1 · differentiator

Modified liability / limited immunity period

Definition

Section 1707D of the Corporations Act temporarily restricts who may bring proceedings over certain statements in a sustainability report or the auditor’s report on it. During the protected windows, only ASIC and criminal proceedings may be brought; private civil actions cannot. Protection covers Scope 3 emissions, scenario analysis, transition plans and climate-related forward-looking statements, and it expires.

Corporations Act 2001 (Cth) s 1707D

· inserted by the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 Schedule 4 · transitional, expires for financial years commencing on or after 1 January 2028

On this page

In practice
What the assurer does with it
Commonly confused with
Timing and relief
Sources
Related terms
Related questions

Cluster

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

In practice

This is the provision directors ask about first and it is the one most often described loosely. It is worth stating precisely, because the protection is narrower than most summaries imply, and because it is running out.

What the protection actually does. For a statement inside the protected categories, made in the sustainability report or the auditor’s report on it, no action may be brought other than a criminal action or an action by ASIC. Shareholders, class action plaintiffs, lenders, counterparties and other private parties are shut out for the duration of the window. It is an immunity from private litigation, not an immunity from consequence, and the distinction matters because ASIC’s powers are not touched at all.

Two windows, not one. This is the detail that gets lost, and the two windows are very different lengths.

Protected category

Financial years commencing

Effectively

Scope 3 greenhouse gas emissions, scenario analysis, transition plans

1 January 2025 to 31 December 2027 inclusive

Three years

Climate-related forward-looking statements (other than the above)

1 January 2025 to 31 December 2025 inclusive

One year

Read that table against your own balance date before assuming you have three years of cover. A June-balancing Group 1 entity whose first reporting period commences 1 July 2025 has the general forward-looking protection for that first year and nothing after it. A Group 2 entity whose first reporting period commences 1 July 2026 never receives the general forward-looking protection at all, because its first year falls outside the one-year window. It receives only the Scope 3, scenario analysis and transition plan protection, and only for the years commencing 1 July 2026 and 1 July 2027.

The planning consequence for Group 2 and Group 3 is direct. Most private-company boards have been told there is a liability shield. For Group 2 that shield is partial. For Group 3, whose first reporting period commences on or after 1 July 2027, only one protected year exists (the year commencing 1 July 2027) and only for the three-category list. From the following year a Group 3 entity is reporting with no modified liability at all, in its second ever sustainability report.

What is not protected. The categories are exhaustive and the exclusions are the part of the report a private business is most likely to get wrong in year one:

Scope 1 and Scope 2 emissions for the current period
The governance disclosures
The materiality assessment and the judgements behind it
The directors’ declaration itself
Anything in the report that is not a statement made to comply with the sustainability standard

That last exclusion is the sharpest one. The protection attaches to statements made in order to comply with AASB S2. Content an entity chooses to add (a voluntary narrative, a claim about its own performance, a reference to an external report) is outside the protection even though it sits on the same page. A report that mixes statutory disclosure with promotional framing creates a document where some sentences are protected and some are not, and the entity does not get to decide which is which after the fact.

Greenwashing is outside it. The protection does not shelter misleading or deceptive conduct. ASIC has been explicit that it retains its greenwashing enforcement powers across sustainability disclosures, and ASIC action is expressly preserved by section 1707D in any event. An entity that reads the immunity as room to overstate has misread it in the most expensive available direction.

The reasonable basis point. A forward-looking statement in a regulated document must have a reasonable basis. Section 1707D changes who can sue, not what makes a statement defensible. A scenario analysis with no documented methodology is not made safe by the window; it is made temporarily unlitigable by private parties, which is not the same thing, and the file that would have been needed in court is the same file the assurer asks for anyway.

What a board should do with the remaining time. Treat the window as a build period rather than a shield. The statements that will be exposed from 2028 are the ones the entity is drafting now, and the base year, methodology and judgement trail behind a 2026 transition plan is the evidence that supports the 2029 version of it. The practical test is whether the entity could defend each forward-looking statement in the report on its documentation alone, with the immunity removed. Where the answer is no, the window is the time to fix it, and the fix is almost always documentation rather than a change to the statement.

What the assurer does with it

The assurance provider does not opine on liability and will not advise on it. The provision matters to the engagement in one respect: the protected categories are also the categories where evidence is thinnest, so the assurer’s procedures concentrate exactly where the immunity sits. They test scenario analysis by process and trail: scenarios used, source, assumptions, when it was performed, who reviewed it, whether the disclosed conclusion follows. They test Scope 3 by method, boundary and screening rationale. They test a transition plan against board approval and against whether the actions and resources described are the ones actually committed. None of that softens because a statement is protected. The point worth making internally is that the assurer’s file and the litigation file are largely the same file, so the work done for assurance during the window is the work that defends the report after it. The auditor’s own report on the sustainability report is itself within the protected statement scope, which is one reason the assurance profession supported the settings.

Commonly confused with

A safe harbour for the whole sustainability report, which it is not: the category list is closed and Scope 1, Scope 2, governance and the materiality assessment sit outside it. Confused with protection from ASIC, which it expressly does not provide. Confused with the modified directors’ declaration under section 296A, which is a separate transitional measure about what directors declare and runs on its own timetable. And confused with the continuous disclosure safe harbour provisions, which are a listed-entity concept and unrelated.

Timing and relief

Both windows are defined by the financial year in which the statement is made, not by the date of the statement. The Scope 3, scenario analysis and transition plan protection is available for financial years commencing 1 January 2025 to 31 December 2027 inclusive. The general climate-related forward-looking protection is available for financial years commencing 1 January 2025 to 31 December 2025 inclusive. Both are gone for financial years commencing on or after 1 January 2028. There is no mechanism to extend either window on application, and no proposal to extend them is law.