This Bills Digest replaces a preliminary Digest published on 25 February 2026 to assist in early consideration of the Bill.

Key points

• The Treasury Laws Amendment (Financial Reporting System Reform) Bill 2026 (the Bill) proposes to amend the Australian Securities and Investments Commission Act 2001 to merge the Financial Reporting Council, the Australian Accounting Standards Board and the Auditing and Assurance Standards Board into a new body, named External Reporting Australia, with responsibility for performing core financial reporting and sustainability standard-setting functions.
• The proposal was announced by the Treasurer in November 2023, after having been raised in a consultation paper in December 2022.
• In January 2025 Treasury released a consultation paper seeking feedback on the design of the new standard setting body. Treasury received 33 stakeholder submissions.
• In October 2025 Treasury released an exposure draft of the legislation and undertook public consultation. Stakeholder submissions broadly supported the draft bill although a number included recommendations to enhance the reform design.
• External Reporting Australia will have a Governing Council, appointed by the Minister. To be eligible for appointment, a person must have experience in, or knowledge of, at least one of a number of fields listed in the Bill, including law, business, financial markets, accounting, auditing, science and sustainability or climate change. The Minister will also be able to appoint non-voting associate members of the Governing Council. These members will need to meet the same eligibility requirements as Council members.
• The Governing Council will be empowered to create standard-setting boards by disallowable legislative instrument, appoint members to the boards and will have a limited role in standard setting. Some stakeholders have raised concerns about the Council’s involvement in standard setting. Submissions on the exposure draft also included recommendations that standard-setting boards should have a clear and explicit mandate for active participation in international standard-setting processes.
• The Bill has been referred to the Senate Economics Legislation Committee for inquiry and report by 24 April 2026. At the time of writing the Committee had received and published 12 submissions.
• The Senate Standing Committee for the Scrutiny of Bills has commented on certain provisions in the Bill questioning whether there is appropriate parliamentary scrutiny in the making of certain standards.

Introductory Info

Date of introduction: 12 February 2026
House introduced in: House of Representatives
Portfolio: Treasury
Commencement:
Parts 1 and 3 of Schedule 1 to the Bill commence on the later of:

• 1 November 2026; and
• the first day of the first calendar month after the end of 4 months beginning on the day of Royal Assent.

Part 2 of Schedule 1 to the Bill, which contains the transitional provisions to support the merging of the financial reporting bodies, commences on the later of:

• 30 June 2026; and
• the day after Royal Assent.

Purpose of the Bill

The purpose of the Treasury Laws Amendment (Financial Reporting System Reform) Bill 2026 (the Bill) is to amend the Australian Securities and Investments Commission Act 2001 (the Act) to merge the Financial Reporting Council (FRC), the Australian Accounting Standards Board (AASB) and the Auditing and Assurance Standards Board (AUASB) into a new body, named External Reporting Australia, with responsibility for performing core financial reporting and sustainability standard-setting functions.

Background

The Treasurer, Jim Chalmers, announced the plan to merge the FRC, AASB and AUASB in November 2023. The idea was raised earlier in the December 2022 Climate-related financial disclosure consultation paper (p. 19).

Part of the Government’s argument for the merger was to ‘better support the ongoing implementation of climate-related financial disclosure standards in Australia.’ As the January 2025 consultation paper, Positioning Australia’s financial reporting system for the future explained:

Recent efforts to develop sustainability and climate-related financial disclosure standards in Australia and internationally have highlighted the need to ensure the institutional arrangements for standard setting are sufficiently flexible to respond to developments in the reporting landscape now and in the future (p. 3).

Despite discussion of a merger being included in the 2022 consultation paper, the Treasurer’s November 2023 announcement ‘was a surprise to most observers’ according to an article in the Australian Accounting Review (AAR).

In a media release, Chartered Accountants ANZ described the change as ‘the largest reform to the accounting and audit standard setting bodies in decades’ and considered that the Government should have consulted before making the announcement. The then Shadow Treasurer, Angus Taylor, told The Mandarin the Coalition supported regulatory simplification but expressed concern that the Government had not consulted key stakeholders.

While a headline in the Financial Review suggested the merger ‘could transform accounting,’ some observers questioned whether it would make much practical difference. At a panel session held at the Accounting and Finance Association of Australia and New Zealand’s annual conference in July 2024, one panellist noted the 2 boards (AASB and AUASB) have operated out of the same premises and shared administrative staff and systems for years, and that much of the FRC’s work is undertaken through board staff-sharing arrangements (p. 368).

Setting standards for external reporting

The proposed standard setting body will be named External Reporting Australia. As a 2025 consultation paper notes, external reporting refers:

… to the periodic communication of financial and other information concerning an entity for the purposes of informing stakeholders external to the entity (for example, the preparation of annual reports). The term contrasts with reporting prepared for internal business purposes (such as management accounts) (p. 5).

Standards enable external stakeholders to compare information between entities and across time. Standards can be voluntary or mandatory. Standards for external reporting fall into three categories:

• accounting standards
• sustainability standards
• auditing and assurance standards.

AASB sets standards for reporting financial and other information. The AUASB sets auditing and assurance standards.

Consultation prior to the introduction of the Bill

Raising the proposed merger as an option in the 2022 climate related financial disclosure consultation paper may be the reason it attracted so little attention. It meant it was overshadowed by the more controversial proposal to require disclosure of Scope 3 emissions.

2022 Climate-related financial disclosure consultation paper

The 2022 consultation paper argued that structural changes were needed to the standard setting bodies ‘to support implementation of climate risk disclosure standards and the ongoing efficiency and effectiveness of the financial reporting system’ (p. 17). The paper outlined 3 potential structures including the one the Government finally chose (potential structure 3). The first option was to confirm the AASB as the entity responsible for sustainability standards. The second was to establish a separate board for sustainability standards. The third was:

Potential Structure 3. Reform existing financial reporting bodies into a single, flexible entity

Under this proposal, Commonwealth legislation would be amended to combine the functions and powers of the FRC, AASB and AUASB into one entity responsible for financial reporting system oversight, standard-setting and advice to government. In addition to the accounting and auditing standard setting powers of the AASB and AUASB, the body would also have statutory authority to make climate and sustainability risk disclosure standards (p. 19).

In their submission on the consultation paper, Chartered Accountants Australia and New Zealand (CA ANZ) and CPA Australia stated that potential structure 3 ‘would affect wider financial reporting and assurance stakeholders who may not be engaged with this consultation.’ As a result, they argued that it would require additional consultation and engagement. They argued it was outside of the scope of the 2022 consultation (p. 20).

Among the relatively small number of submissions that addressed this issue, there was no consensus about which potential structure was preferable.

2023 Announcement

In November 2023, Treasurer Jim Chalmers and Assistant Treasurer and Minister for Financial Services, Stephen Jones announced the Government’s choice of structure:

The Albanese Government will restructure the nation’s financial reporting bodies to make them more efficient, effective and fit for purpose, including to assist Australia in implementing new climate and sustainability standards.

The three bodies that currently oversee financial reporting and set reporting standards – the Australian Accounting Standards Board (AASB), the Auditing and Assurance Standards Board and the Financial Reporting Council – will be combined into a single entity.

January 2025—Positioning Australia’s financial reporting system for the future consultation paper

In January 2025, the Treasury began consulting on Positioning Australia’s financial reporting system for the future. The paper made it clear that the Government had decided on a merger and was seeking feedback on how to refine and settle the design of the new standard setting body. Treasury received 33 submissions.

October 2025—Exposure draft

On 30 October 2025 Treasury released an exposure draft of the legislation and undertook public consultation. Treasury received 20 submissions, including 4 classed as confidential. Submissions broadly supported the draft bill although a number included recommendations to enhance the reform design. Further discussion of submission views is included below in the Key issues and provisions section.

Existing institutions

As the Bill’s Explanatory Memorandum (EM) explains, responsibilities for accounting, auditing and assurance and sustainability standard setting are split across five separate statutory entities: the AASB, the AUASB, their respective Offices, and the FRC (p. 7).

Financial Reporting Council

The FRC has a broad oversight function in relation to the processes for setting accounting standards, sustainability standards, and auditing and assurance standards in Australia and for giving the Minister reports and advice. It is also responsible for providing strategic policy advice in relation to the quality of audits conducted by Australian auditors.

The FRC is a statutory body under Part 12 of the Australian Securities and Investments Commission Act 2001 (the Act).

Australian Accounting Standards Board

As outlined on its website, the AASB’s functions are:

• to develop a conceptual framework for the purpose of evaluating proposed standards;
• to make accounting standards under section 334 of the Corporations Act 2001;
• to formulate accounting standards for other purposes;
• to participate in and contribute to the development of a single set of accounting standards for worldwide use; and
• to advance and promote the main objects of Part 12 of the ASIC Act, which include reducing the cost of capital, enabling Australian entities to compete effectively overseas and maintaining investor confidence in the Australian economy.

According to the AUASB and AASB corporate plan 2025/26:

The Office of the AASB provides technical and administrative services, information and advice to the AASB. The Chair of the AASB is also the Chief Executive Officer of the Office of the AASB, however the CEO responsibilities have been delegated (to the maximum extent permitted) to the Managing Director (p. 7).

The AASB is a non-corporate Commonwealth entity established under the ASIC Act (p. 33).

Auditing and Assurance Standards Board

According to the AUASB and AASB corporate plan 2025/26:

The AUASB is … responsible for making auditing standards under section 336 of the Corporations Act 2001 for the purposes of the corporation’s legislation. The AUASB also formulates auditing and assurance standards for other purposes and participates in and contributes to the development of a single set of international auditing standards for worldwide use.

…

The Office of the AUASB provides technical and administrative services, information and advice to the AUASB. The Chair of the AUASB is also the Chair and Chief Executive Officer of the Office of the AUASB. The corporate services function responsibilities for the Office of the AUASB have been delegated (to the maximum extent permitted) to the Managing Director.

The AUASB is a non-corporate Commonwealth entity established under the ASIC Act (p. 33).

Policy position of non-government parties/independents

During debate in the House of Representatives, Coalition members opposed the Bill. Shadow Assistant Treasurer Pat Conaghan stated:

The coalition can't support this bill in its form at this time. We are not convinced that the changes will improve the current system or deliver better outcomes. Stakeholders have raised significant concerns about independence, governance and concentration of power under this bill, and those concerns deserve proper scrutiny. That is why we will seek examination of this legislation through the Senate Economics Legislation Committee.

Any changes to institutions that underpin our financial system must be made carefully and only when the case is clear (p. 8)

Other parties and independents did not speak on the Bill, however those present in the Chamber at second reading stage, voted in favour of the Bill (pp. 539–540)

Key issues and provisions

The Bill amends Part 12 of the ASIC Act, which deals with the Australian financial reporting system, to create a new entity—External Reporting Australia—that combines functions and powers of the AASB, the AUASB (including their offices), and the FRC. The new body will be responsible for making and formulating accounting, auditing and assurance, and sustainability standards.

External Reporting Australia

Item 13 of Schedule 1 repeals current Divisions 1 to 3 of Part 12 of the ASIC Act and inserts proposed sections 225 to 234B to establish External Reporting Australia and set out its functions, powers, structure, personnel and procedures. It also provides guidance on the interpretation of, and process for determining, standards issued by the new body. The more significant of these provisions are discussed below.

Proposed section 225 continues the AASB in existence, with a new name, External Reporting Australia (ERA). ERA will have a Governing Council as an accountable authority under the Public Governance, Performance and Accountability Act 2013 (PGPA Act),

Functions of External Reporting Australia

The functions and powers of ERA, set out in proposed section 225A are to do the following:

• to make accounting, auditing and assurance, and sustainability standards for the purposes of the Corporations Act (proposed paragraph 225A(1)(a)). Note 1 explains that these standards have legal effect under the Corporations Act
• to formulate accounting, auditing and assurance, and sustainability standards in respect of activities or things in a Territory, or for other purposes, and publish these online (proposed paragraph 225A(1)(b)). Note 2 explains that the standards described in this paragraph do not have legal effect under the Corporations Act but may be applied and adopted by some other legal authority
• to formulate guidance related to standards (proposed paragraph 225A(1)(c))
• to develop conceptual frameworks for evaluating both domestic and international standards (proposed paragraph 225A(1)(d))
• to contribute to the development of accounting standards, auditing standards and sustainability standards for world‑wide use with appropriate regard to international developments (proposed paragraph 225A(1)(e))
• to monitor the development of, and amendments to, international accounting, auditing and sustainability standards (proposed paragraph 225A(1)(f))
• to monitor the development of accounting standards, auditing standards and sustainability standards as they apply in major international financial centres (proposed paragraph 225A(1)(g))
• to give strategic policy advice to the Minister in relation to its functions and powers under the Act (proposed paragraph 225A(1)(h))
• any other function as specified in a legislative instrument made by the Minister under subsection 225A(2) (proposed paragraph 225A(1)(i)).

Additional functions determined by the Minister

Proposed subsection 225A(2) provides the Minister may by legislative instrument specify new functions and procedural requirements in relation to those new functions. These functions may relate to standards of any kind, and are not limited to accounting, auditing and assurance or sustainability (proposed subsection 225A(3)).

The CA ANZ and CPA Australia joint submission on the exposure draft had concerns regarding the Minister’s power to add functions of ERA in these provisions stating:

This power introduces the risk of undermining the integrity of the new structure bypassing due process and determining potentially significant further functions or changes without adequate consultation. While we recognise the design principle of flexibility, this needs to be appropriately balanced against accountability, but which is not adequately done so under this measure. (p. 13)

The submission therefore suggested that the provisions be removed, and that further functions (including procedural requirements) that may need to be added to ERA should be determined through separate consultation. (p. 13).

The Business Council for Sustainable Development Australia (BCSDA) also expressed concern about the scope of the Minister’s power to add functions of the ERA (and to give directions about the role of international standards in the making of standards, discussed below). The BCSDA recommended that ‘these powers should not be capable of directing the technical content of a particular standard’ and, at a minimum, their exercise should be accompanied by:

• public consultation
• a published statement of purpose and implementation impact
• parliamentary scrutiny through disallowable instruments where appropriate and
• a statutory non-interference principle, on the face of the legislation, preserving technical standard setting independence (pp. 4-5).

Formulation of certain standards by External Reporting Australia

Proposed subsection 225B(1) provides that ERA may by written instrument formulate a standard for the following:

• its functions under paragraph 225A(1)(b) (which deals with accounting standards, auditing and assurance standards and sustainability standards other than for the purposes of the Corporations law)
• its functions under paragraph 225A(1)(i) (which deals with additional functions determined by the Minister) to the extent that they involve the formulation of standards.

A standard made under this section would be a legislative instrument if, at the time that it is formulated, any part of the standard could reasonably be expected to affect a person’s rights or obligations under a law of the Commonwealth, directly or indirectly (proposed subsection 225B(2)). Where such a standard does not meet this test, it would not be a legislative instrument (proposed section 225B(3)) and therefore would not be subject to requirements for tabling, or automatic sunsetting or disallowance processes under the Legislation Act 2003.

Senate Standing Committee for the Scrutiny of Bills  

The Senate Standing Committee for the Scrutiny of Bills has commented on these provisions, raising questions and seeking clarification in regard to whether there is appropriate parliamentary scrutiny in the making of certain standards by ERA (pp. 61–63). The Committee acknowledges the explanation in the EM (pp. 14–15) that only those standards which are not legislative in character are excluded from parliamentary scrutiny. However, it is not clear to the Committee ‘that an appropriate opportunity would arise for parliamentary scrutiny of a non-binding standard where it is incorporated by reference into, or otherwise given legislative force by, other legislation (whether primary or delegated) sometime after it is formulated’ (p. 63).

Considering these concerns, the Committee requested the Assistant Treasurer’s detailed advice as to:

• why it is necessary and appropriate to provide for the making of standards that are not legislative instruments
• whether or not standards made as non-legislative instruments with the intention that they later be incorporated or applied by reference would be reasonably expected to affect a person’s rights and obligations in Commonwealth laws for the purposes of the test in proposed subsection 225B(2) and
• whether additional guidance could be provided, in the EM or otherwise, to provide further clarification of this issue (p. 63).

In response, the Assistant Treasurer advised that the test in proposed section 225B ‘is intended to involve a factual enquiry about whether the standard could affect a person’s rights or obligations under a law of the Commonwealth at the time it is made’ (emphasis added, p. 61.) The Assistant Treasurer informed the Committee that ERA would not be ‘responsible or answerable for any subsequent incorporation, adoption or application of a standard’, even in circumstances where the ERA intends that a non-legislative standard would or may later be incorporated under other Commonwealth legislation. Instead, the Assistant Treasurer advised that ‘it is appropriate for Parliament to scrutinise any incorporation by reference at a later time, such as by disallowing the instrument that seeks to apply the non-legislative standard’ (p. 61).

Acknowledging the Assistant Treasurer’s response, the Committee noted that:

it is not aware of other laws that provide for an instrument to be made as a legislative or non-legislative instrument according to the assessment of officials. The approach proposed by the bill therefore appears to be novel as a matter of Commonwealth legislation (p. 61).

Given the importance of parliamentary scrutiny of law-making power delegated to the executive, the Committee advised that this new approach should be ‘accompanied by extensive justification’ (p. 61). The Committee drew the matter to the attention of Senators for further consideration (p. 62).

External Reporting Australia: manner of performance of its functions

Proposed subsection 225A(5) provides that ERA must, as far as practicable, perform its functions:

• in a way that promotes the objects of Part 12 of the Act (section 224 of the ASIC Act, including proposed paragraph 224(ab) at item 12 of the Bill) in a way that promotes the continued adoption of international best practice if doing so would be in the best interests of both the private and public sectors in the Australian economy
• with regard to the interests of Australian corporations which raise capital in major international financial centres
• with regard to the public interest in the accessibility of appropriate and reliable financial and other related information to the wide variety of stakeholders who engage with, or have an interest in, the activities and affairs of private sector entities and public sector entities, particularly investors and creditors. This final consideration is a new addition, which was not in the exposure draft of the Bill.

The EM states this new consideration provides further recognition of:

• the important role External Reporting Australia plays in setting standards not only for the private sector, but also the public sector; and
• the broader public interest underpinning External Reporting Australia’s functions. (EM p. 16)

The Tax Justice Network Australia submission on the exposure draft argued for consideration of public interest stating:

While External Reporting Australia will be required to act in the best interests of the private and public sectors in the Australian economy, we urge that it also be required to act in the public interest, which goes beyond just considerations that benefit the economy. (p. 1)

International standards

Proposed section 225C provides that the Minister may by legislative instrument give directions about the role of international standards in the making of standards by ERA.

While this Ministerial power currently exists in section 233 of the of the ASIC Act, the CA ANZ and CPA Australia joint submission on the exposure draft strongly recommended that this provision be removed from the Bill, arguing that:

The adoption of international standards, particularly for our capital markets, is essential to maintain Australia’s position as a leader in the global economy. Any direction that undermines this position is likely to be to our detriment. (p.11)

The Australian Financial Markets Association submission also raised concerns about this provision. It cautioned that the ‘adoption of and alignment to international standards is essential to the function of Australia’s financial markets. We recommend that consultation with industry ahead of any legislative instrument being made, be explicitly required in the draft Bill’. (p. 1)

The EM justifies this provision arguing:

As a legislative instrument is required, any direction given by the Minister to External Reporting Australia will be informed by appropriate consultation with stakeholders. The legislative instrument is subject to disallowance and therefore additional Parliamentary scrutiny. (p. 17)

Governing Council

The Governing Council’s primary role is to govern ERA. Its functions, set out in proposed section 226A are:

• to ensure the proper, efficient and effective performance of ERA’s functions
• any other functions conferred on the Governing Council by the Act.

The members of the Governing Council including its Chair, will be appointed by the Minister. To be eligible for appointment, a person must have experience in, or knowledge of, at least one of a number of fields listed in the Bill, including law, business, financial markets, accounting, auditing, science, sustainability or climate change, and any other field the Minister considers appropriate having regard to any additional functions that have been determined by the Minister (proposed section 227A).

In its submission to the Senate Economics Legislation Committee inquiry into the Bill, the Uniting Church in Australia, Synod of Victoria and Tasmania (Uniting Church) expressed concern that the criteria for appointment to the Governing Council ‘will not ensure that the Council is not captured by private-sector interests that could act against the broader public interest’ (p. 1). To address this concern, the Uniting Church recommended that the Governing Council and standard-setting boards include representatives of consumer bodies and members who have expertise in ethics (p. 2). The Uniting Church further considered that a stand-alone ethics board should be created to advise the Governing Council and standard-setting boards.

Before appointing a person as a Council member, the Minister must have regard to the principle that the Governing Council should have an appropriate level of representation of persons who are, and are seen to be, independent from Australian auditors (proposed paragraph 227A(5)(a)). The EM explains that this requirement is intended to mitigate against actual or perceived conflicts that auditors may have in both contributing to the development of, and complying with, standards set by ERA. The EM also emphasises that this approach does not disqualify persons who are auditors or have current links to an audit firm from appointment to the Governing Council but is intended to ensure that an appropriate balance is struck (EM, p. 20).

In addition to these considerations regarding appointments, proposed paragraph 227A(5)(b) provides that the Minister must, as far as practical, ensure there is an appropriate balance of expertise or experience in fields relevant to ERA’s functions. This provision was not in the exposure draft and may have been added in response to concerns in submissions about independence and composition of the Governing Council. In particular the CA ANZ and CPA Australia joint submission raised concerns with the focus on independence from auditors and recommended instead that the section be amended to establish a broader principle of independence and multi-stakeholder representation. (p. 3)

Associate members of the Governing Council

One of the differences between the exposure draft and the Bill as introduced is the ability for the Minister to appoint non-voting associate members of the Governing Council. These members will need to meet the same eligibility requirements as Council members (proposed section 228). They will not be part of the accountable authority of ERA and their primary role will be to participate in Governing Council Meetings and to advise on matters relating to their particular field of expertise (EM, p. 29).  

The rationale for associate members is recognition that ‘in some cases it may be highly desirable for a particular appointee to join the Governing Council on account of particular expertise or insights they can bring to its deliberations, but their circumstances or other commitments may mean that they are unable to take on the full responsibilities of membership of External Reporting Australia’s accountable authority’. (EM, p. 29)

A number of submissions on the exposure draft expressed a view that the new ERA must be suitably resourced. For example the CA ANZ and CPA Australia joint submission referred to the need for high level expertise on both the Governing Council and the standard setting boards in order to maintain the ‘current effective and internationally respected Australian standards setting model’. (p. 18)

Standard-setting boards

The Governing Council is empowered to make a legislative instrument (referred to as a determination) to establish a standard-setting board, to define the scope of its functions and to set out the procedures it must follow when exercising its standard-setting powers. The determination may also set out the extent to which (if at all) the standard-setting board is empowered to establish committees and consultative groups (proposed section 230). The EM advises that ‘[a] single determination may establish more than one standard-setting board’ (p. 33).

The Governing Council must ensure that there is at least one standard-setting board covering each of the following categories:

• accounting standards
• auditing and assurance standards
• sustainability standards (proposed section 230A).

Role of standard setting boards

Proposed section 230B provides that a determination made under section 230 has effect as an authorisation by the Governing Council for the standard‑setting board to:

• perform certain functions of ERA in relation to the kinds of standards specified in the determination
• establish committees and consultative groups, to the extent set out in the determination and
• exercise the powers of ERA necessary or convenient to perform those functions.

The specific functions of a standard-setting board are:

• to make standards under the Corporations Act
• to formulate other standards
• to formulate guidance on those standards
• to develop conceptual frameworks for those standards
• any other functions of ERA specified in the determination

In comments on the equivalent provision in the draft bill, the CA ANZ and CPA Australia joint submission questioned why these functions do not refer to international engagements. It notes that under current arrangements the standard setting boards undertake extensive interaction with international standard setters, which are essential for Australian standard setting activities. While these international activities are provided for in the ERA’s functions, these functions are not passed on to the standard-setting boards through legislative instrument as set out above. The submission argues:

In order to maintain Australia’s credibility and influence on international standards adopted locally, this critical aspect of the current structure needs to remain unchanged and the role of the standard-setting boards with expertise in the subject matter, and relationships with the international standard-setting community, must be provided for explicitly in the legislation. (p. 8)

Similarly, Responsible Investment Association Australia’s submission ‘strongly recommends that the new ERA, and consequently, the standard-setting boards, have a clear and explicit mandate for active participation in international standard-setting processes. This should include representation in global forums, collaboration with international bodies, and proactive engagement in shaping emerging global standards’. It explains:

International engagement for global standard setting is fundamental for a mature economy such as Australia to ensure alignment of global standards. International alignment of standards is critical for institutional investors who need high-quality, comprehensive and comparable information about companies to make decisions about where to direct capital to align with both financial and sustainability objectives. This alignment is also important to ensure Australia can continue to attract global capital and to ensure the continued competitiveness of key Australian industries into the future. (p. 3)

EY Australia’s submission also stressed the importance of international standards and recommended:

The determination establishing the standard-setting boards should explicitly require alignment of domestic standards with international standards (modifications must satisfy strict criteria) and include a unified due process framework applicable to all standard-setting boards. This determination, as a legislative instrument, should be subject to public consultation before being finalised. (p. 3)

Standard‑setting board members

Proposed section 231 provides that standard-setting board members are to be appointed by the Governing Council by written instrument. The qualifications and experience for appointment to the Governing Council are essentially replicated for standard-setting board members. To be eligible for appointment, the Governing Council must be satisfied that a person has experience in, or knowledge of, at least one of a number of fields: law, business, financial markets, accounting, auditing, science, sustainability or climate change or any other field the Governing Council considers appropriate having regard to any additional functions of ERA that have been determined by the Minister under paragraph 225A(1)(i).

The Governing Council, in appointing a board member, must ensure, to the extent practicable, that the composition of a standard‑setting board reflects an appropriate mix of persons with the qualifications, skills and experience that reflect both:

• the users of the kinds of standards determined for that board, and
• the users of materials prepared in accordance with those standards.

Standards issued by External Reporting Australia

Interpretation of standards

Proposed section 233 provides instructions in relation to the interpretation of standards made by ERA. Specifically, an interpretation that would promote the objects of Part 12 of the Act and a purpose or object of the standard (to the extent it is not inconsistent with the objects of Part 12) is to be preferred to an interpretation that would not (proposed subsections 233(1) and (2)). This applies even if the standard does not expressly state a purpose or object.

Additionally, where the Minister has conferred functions on ERA in relation to a new kind of standard under section 225A(1)(i), the Minister may by legislative instrument also provide for interpretation rules in relation to that kind of standard (proposed subsection 233(3)).

The CA ANZ and CPA Australia joint submission on the draft bill strongly recommended that this latter provision be removed arguing that ‘the ability for the Minister to interpret standards undermines the integrity and independence of External Reporting Australia and the standard-setting boards and has the potential for the Minister to exert undue influence over External Reporting Australia and the standard-setting process’. (p.11)

The EM justifies the provision stating that it provides additional flexibility for the Minister to consider whether the existing interpretation provisions are appropriate for the new kind of standards ERA will have responsibility for. Also, as this provision only operates in relation to new kinds of standards, it does not enable the Minister to set or alter the interpretation rules for accounting, auditing and assurance and sustainability standards (EM, p. 47).

Cost/benefit analysis

Proposed section 233C requires ERA to conduct a cost/benefit analysis of the impact of a proposed standard before making or formulating that standard, to the extent to which it is reasonably practical to do so.

The Uniting Church submitted that this analysis should consider ‘social, ethical and environmental benefits and costs’ in addition to financial costs and benefits (p. 2).

Governing Council’s involvement in standard setting

The Governing Council’s involvement in standard setting is set out in proposed section 233D. The Governing Council may by notifiable instrument give written directions to a standard-setting board in relation to a particular standard, or itself make, formulate, vary or revoke a particular standard. Such directions must follow strict procedural requirements.

The decision to do so must be made at a meeting of the Governing Council and one or more of the following must apply:

• there must be agreement of at least 75 percent of the Council members present and entitled to vote, with the number of Council members who agree representing greater than 50 per cent of all Council members entitled to vote, regardless of who is present
• the Governing Council considers that the decision is required because the standard-setting board has failed to comply with any requirements of the determination that established the board
• the Governing Council considers that the decision is required to comply with its obligations as the accountable authority of ERA for the purposes of the finance law within the meaning of the PGPA Act.

Directions of this kind would also need to be published and explained in ERA’s annual report (proposed section 229H).

The CA ANZ and CPA Australia joint submission raised concerns about the Governing Council’s involvement in standard setting arguing that the safeguards, context and process in this provision are ‘not sufficient to meet the design principle of accountability, and to demonstrate to stakeholders that the risk of undue influence has been appropriately mitigated’. The submission recommends that if the exception is to be retained then it should be limited to cases where due process has not been followed and limit any exception to revocation and directing the standards board to revisit the matter, not for the Governing Council to undertake standard setting itself. (pp. 6–7)

The Institute of Public Accountants submission also expressed concern regarding this provision. Its position is that the existing separation and independence of each standard- setting board to develop and make standards should be retained and the Governing Council should be ‘prevented from directing or exercising a veto over the standard’s setting board development, making or recommending a particular standard. This separation is crucial for preserving and upholding accountability, independence and avoiding conflicts of interest between the GC and standard setting boards’. (p. 3)

Similarly, EY Australia ‘strongly believe that the Governing Council should only intervene in a standard-setting board’s work under exceptional circumstances with supermajority affirmative vote by members of the Governing Council’. It argues:

This intervention should be limited to revoking a standard and directing the standard-setting board to reformulate or amend the standard in accordance with due process. It is not appropriate for the Governing Council to be directly involved in formulating and amending standards as the membership of the Governing Council does not comprise technical and subject matter experts needed in the detailed work of standard setting, and the Governing Council is not bound by standard setting due process (p. 3-4).

Conflict of interest

The Bill includes measures to deal with conflicts of interest among Council members and associate members, and Board members. These include requirements:

• that a Council Chair appointed on a full-time basis must not engage in paid work outside the duties of the Council Chair’s office without the Minister’s approval (proposed section 227J)
• that Council members and Council associate members must disclose material personal interests relating to the affairs of ERA under the PGPA Act and rules made under that Act (proposed sections 227K and 228F)
• on board members to disclose material personal interests promptly and, generally, not vote on matters where they have disclosed a material personal interest (proposed section 231H and Public Governance, Performance and Accountability Rule 2014, subsection 16B(2)).

In addition, there is to be a code of conduct. Proposed section 234A provides that the Council Chair must determine, in writing, a code of conduct, which applies to Council members, Council associate members, board members, staff of ERA and persons assisting ERA. The code will not apply to anyone engaged under the Public Service Act 1999, as these people are covered by the APS Code of Conduct.

After the Treasury’s release of the exposure draft, there was some debate related to restrictions to appointments to the Governing Council on conflict of interest grounds.

In a December 2025 Senate Estimates hearing, Senator Barbara Pocock argued for ‘a clean wall around conflicts of interest in an important new body like this’. The Senator said:

A major contributor to the very many challenges that have arisen in reviews of the big four consulting firms has been the general question of regulatory capture. There was no rule to prevent former partners of the big four, for example, with financial ties to them, including very long trailing sources of income, sitting on the Tax Practitioners Board, which is why we moved an amendment to fix that loophole that allowed big consultants to regulate themselves. Now that we're in the process of establishing a new standard-setting institution for consulting, auditing and accounting, how will eligibility work for appointments to the governing council and technical-standard-setting boards under the draft legislation? (pp. 47-48)

A Treasury official responded by stressing the need for expertise and experience in how standards are applied and argued that ‘the more you have a blanket exclusion in the legislation, you'd be limiting the scope of the number of potential participants in the role’ (p. 48).

A 2023 report in the Australian Financial Review, quoted Liberal Party Senator Richard Colbeck arguing against legislating to exclude particular groups of people from the new body. He said:

I wouldn’t want to see principles that were injected into the [Tax Practitioners Board] – which ruled people in and out based on the size of their firm - injected into this process

Transitional and consequential provisions

Part 2 of Schedule 1 to the Bill includes provisions relating to the transition from the existing institutional arrangements for standard setting to the new framework where the functions and powers are combined and conferred on ERA. The EM states that the transitional provisions are designed to ensure ERA can begin operations from the day the amendments establishing the new framework take effect; the ERA’s start date being the later of 1 November 2026 and the first day of the calendar month 4 months after Royal Assent (p. 58). The transitional provisions in Part 2 commence on the later of 30 June 2026 and the day after Royal Assent.

The EM states that the transitional provisions facilitate a staged approach to setting up ERA that involves:

• the Government first determining the composition of ERA’s inaugural Governing Council, and
• the proposed appointees then setting up key elements of ERA’s internal arrangements, so they are ready for commencement (EM p. 58)

Some of the more significant transitional provisions are described below.

Proposed section 349 has the effect of allowing the FRC to establish standard-setting boards by legislative instrument and to make appointments to such boards. The appointments will take effect from the start date of ERA.

Proposed section 350 requires the FRC in the exercise of its powers granted under section 349 to ensure that standard-setting boards are established on the ERA start date in a manner consistent with ERA’s statutory obligations. For example, FRC would be obliged to create a minimum of three standard-setting boards each with responsibility for one of the inaugural categories of standards.

Proposed section 352 facilitates the transfer of members of the FRC (including the Chair) to ERA. On the start date of ERA, members of the FRC will transfer to the Governing Council of ERA for the balance of their term of appointment. This is a new provision not included in the exposure draft.

Proposed section 365 would allow the Minister to make rules which are required or necessary for other transitional provisions. It would also allow the Minister to make rules prescribing transitional matters relating to the amendments or repeals made by Part 1 of Schedule 1 to the Bill. Proposed subsection 365(3) places limitations on the transitional rules that could be made and lists what the rules may not do (for example the rules may not create an offence or impose a tax).

Part 3 of Schedule 1 contains consequential amendments to other legislation. Item 38, not previously included in the exposure draft is an important savings provision. Amongst other things it inserts into Chapter 10 of the Corporations Act proposed section 1737, its effect being to ensure standards made under the Corporations Act, which are in effect immediately prior to the ERA start day, continue in effect and can be dealt with by ERA. This covers accounting standards made by the AASB, auditing standards made by the AUASB and sustainability standards made by the AASB.

The EM states this savings provision ensures stability and continuity for users of the existing standards made under the Corporations Act. It also ensures that at a future date, ERA may revoke or withdraw existing standards and remake them (EM p. 66).

The BCSDA recommended that a ‘formal independent post-implementation review’ be conducted within two years of the ERA’s start date, and that this review should assess whether the new model is:

• preserving technical quality and independence
• ensuring the Governing Council’s composition, skills mix and operation are supporting balanced expertise, effective oversight and public confidence
• providing effective transparency and consultation
• supporting timely and practical implementation
• maintaining international credibility and alignment and
• managing implementation burden proportionately (p. 5).