EPBC Act Tranche 2 reforms and independent National EPA commence operations

Overview

On 1 July 2026, Australia’s federal environmental regulatory framework underwent its most consequential structural change since the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) first came into force. The commencement of the EPBC Act Tranche 2 reforms brought with it the formal establishment and operational launch of Environment Protection Australia (EPA), created under the Environment Protection Australia Act 2025 (Cth). For the first time in Australia’s federal environmental history, an independent statutory body now holds direct responsibility for compliance, enforcement, environmental permitting, and audit functions under the EPBC Act, operating at arm’s length from ministerial direction.

This is not merely an administrative reshuffling. The reforms fundamentally rewrite the legal risk profile for any proponent, landowner, developer, or infrastructure operator whose activities touch on matters of national environmental significance. Maximum civil penalties for bodies corporate have risen to 50,000 penalty units, equivalent to $16.5 million, while individuals face penalties of up to 5,000 penalty units, or $1.65 million. A new scaling formula means penalties can also be calculated by reference to the financial benefit derived from the breach or the size of the enterprise involved, removing any rational business calculus that treated non-compliance fines as an acceptable operating cost.

For environmental consultants, legal practitioners, councils, and their clients, the significance is immediate and practical. The reforms introduce new categories of compliance auditing, including audit powers that apply retrospectively to approvals and exemptions granted before 1 July 2026. Simultaneously, a proposed new pathway under section 74AA(1) of the EPBC Act offers proponents a mechanism to seek agreement for preparatory works during an ongoing controlled action assessment, providing a tool to maintain project momentum without breaching federal offence provisions. Together, these changes demand an urgent reassessment of compliance strategies, environmental management systems, and project approval pathways across the country.

Key details of the EPBC Act Tranche 2 reforms and EPA’s new enforcement powers

EPA is established as an independent regulator under the Environment Protection Australia Act 2025 (Cth), commonly referred to as the EPA Act. The agency assumes administrative responsibility for the EPBC Act’s compliance and enforcement functions, the issuing of environmental permits and licences, and can receive delegated authority for primary referral and approval decisions under the Act. This delegation capacity is significant: it means that EPBC Act assessment and approval decisions, which previously sat directly with the federal Environment Minister, can now be exercised by an independent statutory office holder. This is intended to insulate approval processes from direct political interference, though ministerial oversight mechanisms remain part of the broader legislative architecture.

The penalty escalation under the Tranche 2 reforms is stark. Prior to 1 July 2026, maximum civil penalties under the EPBC Act were substantially lower and widely regarded by industry observers as insufficient to deter large-scale non-compliance. Under the reformed regime, individuals face maximum civil penalties of 5,000 penalty units ($1.65 million) and bodies corporate face 50,000 penalty units ($16.5 million). Critically, these figures are not the ceiling for all circumstances. The new civil penalty formula allows EPA to pursue fines calculated against the financial benefit the proponent derived from the non-compliant conduct, or scaled to the size of the business. For a major resources company or large infrastructure developer, this means the potential penalty exposure could substantially exceed the statutory maximums set out above, depending on the nature and duration of the breach.

The audit framework introduced under the reforms represents a new and distinct compliance risk. EPA’s CEO is empowered to initiate two categories of audit: compliance audits and directed environmental audits. Compliance audits are a new category not previously available under the EPBC Act. Directed environmental audits, which existed previously in a narrower form, have been expanded in scope. The critical operational point for existing approval holders is that both audit categories can be applied retrospectively. Approvals, orders, and exemptions granted under the EPBC Act prior to 1 July 2026 are within scope. This means a project that received its controlled action approval five years ago is not immune from EPA-directed audit scrutiny under the new framework.

The preparatory works exemption proposed under section 74AA(1) of the EPBC Act offers a counterbalancing mechanism for proponents navigating lengthy assessment processes. The Department of Climate Change, Energy, the Environment and Water (DCCEEW) is developing a pathway allowing proponents to seek ministerial agreement to undertake minor or preparatory works while a controlled action assessment is still underway. Once such agreement is obtained, those specified works are exempt from the offence provisions in section 74AA(1). This pathway does not circumvent the assessment process, but it does allow certain physical works on a site to proceed without constituting a breach of federal law, provided the ministerial agreement is secured and the scope of works remains within the agreed parameters. The detail of what constitutes “minor or preparatory works” eligible for this pathway is expected to be defined through DCCEEW guidance and ministerial practice as the framework matures.

Australian context: how these federal reforms interact with state and territory contaminated land and environment frameworks

The Tranche 2 reforms do not exist in isolation. Across Australia, state and territory governments maintain their own environmental protection legislation, contaminated land frameworks, and planning approval regimes. The introduction of EPA as a federal independent regulator raises important questions about how Commonwealth enforcement activity will interact with existing state and territory regulatory functions.

In practical terms, proponents operating under concurrent state and federal approvals will need to ensure their environmental management systems satisfy both regimes. A project holding a state environment protection licence and a Commonwealth controlled action approval may now be subject to audit by both the relevant state environment authority and EPA, potentially with differing requirements and timelines. Practitioners advising clients on compliance obligations will need to map the full regulatory landscape applicable to each project, rather than treating Commonwealth and state obligations as separate and sequential considerations.

For contaminated land specifically, the intersection is most acute where remediation works or site development activities occur on land that also involves matters of national environmental significance, such as proximity to listed threatened species habitat or impacts on wetlands of international importance. State contaminated land regulators typically focus on human health and environmental risk at the local and regional scale, while the EPBC Act framework addresses broader ecological and heritage matters. The expanded audit and enforcement powers available to EPA mean that remediation proponents and site developers must now consider whether their activities trigger EPBC Act referral obligations or fall within the scope of existing controlled action approvals, with non-compliance carrying substantially higher financial consequences than before 1 July 2026.

References and related sources

• Primary source: www.claytonutz.com
• EPBC Act

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This is an iEnvi Machete news summary. Prepared by iEnvi to summarise the source article for contaminated land, groundwater, remediation, approvals and site risk professionals.

Published: 01 Jul 2026

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