Is Your Company a Group 3 Entity? ASRS Reporting Starts July 2027

In December 2025, ASIC issued $2.2 million in infringement notices to twelve large proprietary companies for failing to lodge their financial reports. Bing Lee. Grill'd. Harris Scarfe. Frank Green. These aren't obscure shelf companies. They're household names.

The non-compliance rate from that three-month surveillance? Seventy percent. ASIC examined 217 large proprietary companies and found 151 hadn't lodged financial reports for FY23 and/or FY24.

That same category of company — large proprietary — is about to get hit with mandatory climate reporting under ASRS Group 3. Financial years starting on or after 1 July 2027. And if 70% of them can't file the reports they've been legally required to prepare for years, I genuinely wonder what happens when you add Scope 1 and 2 emissions, scenario analysis, and governance disclosures on top.

The thresholds are lower than most people think

You're a Group 3 entity if you meet two out of three: $50 million or more in consolidated revenue, $25 million or more in consolidated gross assets, or 100 or more employees at the end of the financial year.

Those aren't enterprise-scale numbers. That's a mid-sized construction company in Perth. A logistics operator in western Sydney with a warehouse and a fleet. A food manufacturer in regional Victoria. A law firm with 120 staff and a few good years of revenue. A property developer with a couple of active projects on the books.

The thresholds match the existing definition of a "large proprietary company" under the Corporations Act — the same classification ASIC was already chasing for financial report non-compliance. Treasury's Regulatory Impact Statement estimated around 6,000 entities across all three ASRS groups. Groups 1 and 2 captured the ASX-listed companies, NGER reporters, and the bigger end of the private sector. Group 3 sweeps up everything else that meets those two-of-three tests.

We don't have a precise count of how many Group 3 entities exist. Nobody does, because many large proprietary companies haven't been reporting to ASIC at all (see the 70% figure above). But reasonable estimates suggest thousands. When Treasury raised the large proprietary thresholds back in 2019, they noted that lowering the bar would have removed about 2,200 companies from financial reporting obligations. That gives you a sense of the scale sitting just above the line. The actual Group 3 cohort is larger.

If your company sits anywhere near those thresholds, check now. Not next quarter. Now. The two-of-three test catches people who think they're too small. A company with $40M revenue but $30M in property assets and 110 employees is Group 3. A $55M revenue business with 80 employees and $15M assets isn't. The maths matters.

What Group 1 and Group 2 learned the hard way

Group 1 entities published their first mandatory climate reports from March 2026. We've had a full year now to see what went right and what didn't. Group 2 entities started their reporting periods in July 2026 — many are mid-way through their first reporting cycle right now.

Three patterns keep showing up.

Data was the bottleneck, not strategy. Most companies could articulate their climate risks. What they couldn't do was produce auditable Scope 1 and 2 numbers quickly enough. The problem wasn't that they didn't know their emissions — it's that the evidence trail from utility bill to calculated figure to final report was a mess. Assurance providers spent weeks asking for source documents that lived in email inboxes, shared drives, and filing cabinets. One sustainability manager I spoke with described the first assurance engagement as "an archaeological dig through our accounts payable system."

One-off consulting models broke in year two. Oxford Economics flagged this after reviewing early Group 1 reports. Companies spent $150K to $400K on consultants to build first-year disclosures, often in complex Excel models. When the same companies tried to update those models for year two — without the consultant — they fell apart. The assumptions were undocumented. The data flows were manual. The institutional knowledge walked out the door with the contractor. If you're Group 3 and you're about to call a Big Four firm, learn from this. Build a repeatable system, not a one-off deliverable.

Scenario analysis was either too generic or too expensive. Companies that grabbed a global IEA or NGFS scenario and applied it without localisation got flagged by assurance providers. "How does a 1.5°C pathway affect your specific operations in Queensland versus Tasmania?" is a question auditors actually asked. Companies that did it properly spent $50K to $100K on bespoke analysis. There's a middle ground — two scenarios, mapped to your three or four most material revenue and cost lines — that's enough for year one. But you need to start that work months before your reporting period begins, not during it.

The modified liability gap nobody's talking about

Here's something Group 3 entities need to understand clearly, because it determines your risk exposure from day one.

The government created a modified liability period that protects companies from private litigation over Scope 3 disclosures, scenario analysis, and transition plans. During this window, only ASIC can take action on those specific elements, and remedies are capped at injunctions and declarations.

The window covers financial years commencing between 1 January 2025 and 31 December 2027.

If your financial year starts 1 July 2027 — which is the earliest Group 3 reporting trigger — you squeak in. Barely. Your first reporting period falls within the protected window.

But if you're a calendar-year reporter whose first reporting period starts 1 January 2028? You miss it entirely. No modified liability. Full exposure from your very first disclosure. Private litigants, not just ASIC, can come after your Scope 3 numbers, your scenario analysis, and your transition plan.

And here's what never gets the safe harbour protection, regardless of timing: Scope 1 and Scope 2 emissions. Your actual emission numbers are exposed to full liability from the moment your first sustainability report is lodged. Directors sign off on these under the same Corporations Act provisions that govern your profit and loss. Penalties run up to $15 million or 10% of annual turnover.

We're not trying to scare you. We're trying to make the point that data accuracy isn't optional. It's your legal defence. If an assurance provider can trace every number in your climate disclosure back to a source document, your exposure drops dramatically. If they can't — and look, for most companies doing this manually, they can't — you've got a problem that no disclaimer will fix.

The materiality opt-out (and why it's not an easy exit)

Group 3 entities have one option that Groups 1 and 2 don't. If you genuinely determine that your company has no material climate-related financial risks or opportunities, you can opt out of full AASB S2 disclosure.

Sounds appealing. But there's a catch.

You still have to publish a sustainability report. That report must contain a statement explaining that you've assessed materiality and concluded there are no material climate risks or opportunities. Directors must sign off. An auditor must review it.

Think about what that means in practice. You're a $60M revenue company with 150 employees, operating in Australia in 2027. You're telling your directors, your auditor, and the market that climate change doesn't materially affect your business. Not your energy costs. Not your insurance premiums. Not your supply chain. Not the physical risk to any of your assets. Not a single transition risk from regulation, technology shifts, or customer expectations.

I'm not saying it's impossible. But it's a brave call to put in writing, especially given the ACCC has issued over $42 million in greenwashing penalties in the last twelve months and ASIC has explicitly named sustainability reporting as an enforcement priority. The opt-out requires you to be right — and to prove you undertook a genuine assessment, not a rubber-stamp exercise to avoid the work.

For most Group 3 entities, the honest answer is that climate risks exist. The question is how material they are and how to disclose them properly.

What you actually have to report

The requirements are identical to Group 1 and Group 2. AASB S2 doesn't give Group 3 a lighter version. You get the same four disclosure pillars: governance, strategy (including scenario analysis), risk management, and metrics and targets.

In your first year, you must report Scope 1 and Scope 2 greenhouse gas emissions with limited assurance from your financial statement auditor. Scope 3 is deferred to your second reporting period — that's one year of breathing room, not a permanent exemption.

For Scope 2, you're required to use location-based emission factors. Market-based is voluntary and supplementary. The NGA Factors workbook from DCCEEW gives you the state-level factors: Victoria at 0.78 kg CO2-e per kWh, New South Wales at 0.64, Queensland at 0.67, South Australia at 0.22. The state you operate in matters a lot — a Melbourne office has roughly 3.5 times the Scope 2 intensity of the same office in Adelaide.

Scenario analysis is where most Group 3 companies will feel out of their depth. We still think this is genuinely hard — we've worked through the methodology for our own disclosures and there's no off-the-shelf answer. But year-one expectations are lower than year-three expectations. The standard explicitly anticipates improvement over time. Two scenarios (a 1.5°C pathway and a higher-warming scenario around 2.5-3°C), applied to your most material business lines, is a defensible starting point.

Twelve months. Here's how to use them

If your financial year starts 1 July 2027, you're about thirteen months out from the beginning of your first reporting period. That feels like a lot. It isn't. Group 1 companies that started eighteen months early still found themselves scrambling.

Now through August 2026. Confirm your Group 3 status — actually run the two-of-three test against your latest financials. Assign an internal project lead. This person doesn't need to be a sustainability expert. They need to be organised, have authority to pull data from across the business, and report directly to the CFO or CEO. Start engaging assurance providers. The market for limited assurance engagements is getting tight — mid-tier firms like BDO, Grant Thornton, and Pitcher Partners are booking Group 2 engagements right now, and Group 3 will hit the same bottleneck next year.

September to December 2026. Map every emissions data source in your business. Every electricity account, gas account, fuel card, vehicle fleet, refrigerant system, waste contract. Build the inventory. This is also when you should be standing up your data collection system — whether that's carbon accounting software, a structured spreadsheet, or a combination. Process twelve months of historical data as a test run. Errors will surface. Better now than under assurance.

January to March 2027. Run scenario analysis. Get external help if you need it, but make sure the work is documented in a way your team can update annually. Draft governance documentation — board oversight, risk management integration, how climate feeds into capital allocation. These aren't things you invent for the report; they need to actually be happening.

April to June 2027. Dry-run your full disclosure. Get your assurance provider to review a draft. Fix gaps. Get board sign-off on the approach — not just the document, but the process that will produce it year after year.

I'll be honest: this timeline is tight for a company that hasn't started. If you've already been tracking emissions voluntarily, or you report under NGER, you're ahead. AASB S2 explicitly allows NGER calculation methodologies to be used for your ASRS Scope 1 and 2 disclosures. That's deliberate alignment. Use it.

If you haven't started — if "climate reporting" is still a bullet point on next quarter's board agenda — you need to accelerate. Not because the sky is falling, but because every Group 1 and Group 2 company that left this late said the same thing afterwards: "We should have started six months earlier."

You've got twelve months. That's enough time to build something properly — a repeatable system with clean data, a clear audit trail, and a governance process that doesn't depend on one person's memory. It's not enough time to panic and hire consultants at twice the market rate in April 2027.

Start this month.

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Carbonly.ai automates emissions data extraction from utility bills, invoices, and operational documents for Australian companies facing ASRS and NGER reporting. Our platform provides the auditable data trail that assurance providers require — built specifically for Australian emission factors, regulatory frameworks, and reporting timelines.