Limited immunity provisions to be extended for voluntary sustainability reporting in accordance with AASB S2
The Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Bill 2025, introduced into Parliament on 4 September 2025, proposes to extend the limited immunity provisions in section 1707D for entities preparing voluntary sustainability reports in periods before sustainability reporting becomes mandatory.
What are the limited immunity provisions?
These are also referred to as ‘modified liability settings’. For a set transition period, no legal action other than criminal action, or action by ASIC, can be brought against a person (such as a director or the company) in relation to certain types of statements (‘protected statements’) made within a sustainability report or the auditor’s report on the sustainability report. This means that an investor cannot bring a civil action alleging that a protected statement in a sustainability report is misleading or deceptive.
Our article contains more information about the modified liability settings and protected statements.
Why the change?
The Government’s original intention when passing mandatory sustainability legislation was to provide modified liability settings for all sustainability reports prepared in compliance with AASB S2, regardless of whether or not they are required to be prepared under the Corporations Act 2001. However, section 1707D, as passed, provides limited immunity for entities required to prepare mandatory sustainability reports, but not for voluntary reports.
Note: These extended limited liability provisions do not apply to voluntary sustainability reports in accordance with AASB S1 General Requirements for Disclosure of Sustainability-related Financial Information, the Global Reporting Initiative (GRI), the World Economic Forum International Business Council (WEF IBC), or other voluntary frameworks.
What’s changing?
A new section 1707DA will be introduced to extend the modified liability settings for entities preparing sustainability reports on a voluntary basis, even if they’re not legally required to do so. The aim is to encourage the development of reporting and auditing capabilities across industries in the early stages of the sustainability reporting regime in compliance with AASB S2 in Australia.
Who can use the modified liability settings?
Companies, registered schemes, registrable superannuation entities and disclosing entities that are not required to prepare a mandatory sustainability report can use the modified liability settings for voluntary sustainability reports. However, the voluntary sustainability report must:
- Comply with all the requirements for a mandatory report (i.e. AASB S2), including climate statements and director declarations, and
- Contain a signed directors’ declaration stating that the modified liability settings will apply.
The above declaration is in addition to the directors’ declaration required by section 296A(1)(e) about the climate statements and notes.
Do the modified liability settings apply indefinitely to voluntary sustainability reports in compliance with AASB S2?
No. The extended modified liability settings only apply in the same way as for mandatory sustainability reports (section 1707D). That is:
| Protected statement | Modified liability period |
|---|---|
| Statement relating to climate and, at the time it is made, is about the future. | Report prepared for financial years commencing from 1 January 2025 to 31 December 2025 inclusive. |
A statement made about:
|
Report prepared for financial years commencing from 1 January 2025 to 31 December 2027 inclusive. |
Are voluntary sustainability reports in compliance with AASB S2 subject to audit?
Yes. A voluntary sustainability report in compliance with AASB S2, where the directors state that the modified liability settings will apply, is subject to the same audit or assurance requirements as mandatory sustainability reports (section 301A).
Do ASIC directions apply?
If ASIC considers a statement in a mandatory sustainability report to be incorrect, incomplete or misleading, under section 296E, it can send a written notice to the entity, directing them to:
- Confirm the statement is correct or complete
- Explain the statement
- Provide supporting documents or evidence to substantiate the statement
- Correct, complete or amend the statement, sharing it publicly or with specific persons.
Entities using the modified liability settings for voluntary sustainability reports in compliance with AASB S2 can also be directed by ASIC in this way.
Need help?
Whether preparing mandatory or voluntary sustainability reports, entities need appropriate systems, controls, policies and procedures in place to support the production of sustainability reports under AASB S2 Climate-related Disclosures. Our sustainability reporting and carbon accounting experts are always available to assist with your sustainability reporting journey. Contact us for help.
