This Insight is part of our series examining the reforms to the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act). These reforms are being implemented through the Environment Protection Reform Act 2025 (Reform Act), which passed both Houses of Parliament on 28 November 2025 and received Royal Assent on 1 December 2025.

In this Insight, we focus on how residual impacts are addressed under the Reform Act. The Reform Act elevates 'net gain' to a mandatory gateway test that is central to the approvals framework. Under the reforms, all significant impacts arising from regulated actions must be compensated to achieve a net gain outcome.

The Reform Act also introduces flexibility in how the net gain requirement can be satisfied, offering two distinct pathways. Proponents can either deliver direct offset and restoration activities, or pay a government-administered restoration contribution charge. This dual-pathway approach is designed to facilitate robust environmental and restoration outcomes whilst also ensuring offsets do not create a bottleneck to development.

Below, we outline the reasons for the changes, what the changes are, and key issues to look out for.

Samuel Review

In October 2020, Professor Graeme Samuel AC released the Final Report of the Independent Review of the EPBC Act (Samuel Review). The Samuel Review identified significant deficiencies in the current offset framework. The Samuel Review found that offsets had become the default response rather than a measure of last resort, meaning avoidance and mitigation efforts were often overlooked and proponents too often went straight to offsets. Offsets were often poorly designed and implemented, resulting in net environmental loss rather than gain, with inadequate mechanisms for security, delivery, monitoring and enforcement.

The Samuel Review also noted a lack of transparency regarding the location, quality and quantity of offsets for EPBC Act projects. This approach was found to have resulted in a predominance of 'averted loss offsets' which delivered weak protection to remnant habitats that may never have been at genuine risk.

To address these failures and achieve genuine environmental restoration, the Samuel Review recommended comprehensive reforms to the application of environmental offsets under the EPBC Act, including:

• implementing the 'avoid, mitigate, offset' hierarchy to ensure offsets are only used once appropriate and effective mitigation has been demonstrated;
• replacing the EPBC Act's 2012 Offset Policy with binding laws and a National Environmental Standard for environmental offsets;
• delivering restoration, where possible, rather than merely preserving existing habitat, particularly in areas of highest priority;
• enabling robust advanced offsets to be created before an approval is granted;
• establishing a public register of offsets; and
• considering a mechanism for proponents to contribute financially into an investment organisation dedicated to environmental restoration.

Reform Act– The 3 tests for approval

The Reform Act establishes three mandatory tests that must all be satisfied before an approval can be granted:

1. the action will not result in unacceptable impacts;
2. the action must be consistent with relevant National Environmental Standards (NES); and
3. residual significant impacts can and will be compensated to achieve a net gain.

An approval cannot be granted unless these three tests are satisfied. This section examines each test in the context of environmental offsets. For a deeper dive into the reforms to the assessment and approvals process, see our earlier insight on the revised approvals framework here.

Test 1: Unacceptable Impacts

Unacceptable impacts generally cannot be compensated through offsets. These impacts will need to be avoided or mitigated below the unacceptable impact criteria before an action can be approved. That is, an offset can generally not make unacceptable impacts acceptable. Unacceptable impact criteria are defined in a tabulated manner in the Reform Act for each protected matter.

Test 2: Consistency with NES 

Consistent with a central recommendation in the Samuel Review, the EPBC Act will be amended through the Reform Act to enable the Minister to make, implement and review NES. NES are intended to form the centrepiece of national environmental law reforms by facilitating transparency and consistency in decision-making, providing certainty for proponents on what is required, and increasing the efficiency of assessments and approvals under the EPBC Act.

The Minister can generally only approve an action if satisfied that doing so is consistent with any prescribed NES. The Senate amended the consistency requirement from 'not inconsistent with' to 'consistent with' NES. This change represents a higher compliance threshold, as 'consistent with' requires active compatibility with the NES, rather than merely avoiding inconsistency.

In relation to offsets, the Department of Climate Change, Energy, the Environment and Water (Department) has released the draft NES on Offsets (Draft Offset NES), which is available on the Department's website, with feedback invited until Friday, 30 January 2026. This is one of two proposed NES which have been released early to provide transparency about how NES are intended to operate.

The objective of the Draft Offset NES is to ensure offsets (where permitted) adequately compensate for residual significant impacts to deliver a net gain and contribute to the protection and enhancement of protected matters. This will guide decisions relating to the approval of offsets.

Under the Draft Offset NES, proponents will be required to demonstrate how they have followed the mitigation hierarchy and taken the following four sequential steps: avoid, mitigate, repair, and offset.

When considering proposed offsets, the Minister will have regard to the following eight principles contained in the Draft Offset NES:

• Feasibility: whether compensation for the affected protected matter is appropriate and the impact is able to be compensated for at the time the approval is sought;
• Security: whether offset activities are committed and the offset site is protected and managed to prevent its loss and degradation;
• Direct and tangible: whether offsets provide a tangible benefit to the affected protected matter by directly contributing to its overall conservation outcome;
• Measurable improvements: whether offsets deliver a measurable improvement for the affected protected matter relative to an agreed baseline;
• Additionality: whether offsets deliver benefits that would not have occurred without the offset;
• Like-for-like: whether offsets provide for a like-for-like outcome for the affected protected matter;
• Relevant area: whether offsets are delivered in an area that is relevant to the affected protected matter; and
• Offset commenced prior to impact: whether the offset is secured and actively managed at the offset site prior to the relevant impact starting at the impact site.

Application of these principles is intended to be assisted by further policy guidance.

Test 3: Net Gain

Where impacts are not 'unacceptable impacts' but are still significant, they will generally need to be compensated to achieve net gain.

Net gain is proposed to be defined as the measurable improvement for the affected protected matter relative to an agreed baseline, which is an evidence-based estimate of the likely condition of a protected matter at the point of approval and in the absence of the action or offset being proposed. This baseline is intended to be static from the approval date.

Future regulations will prescribe the amount of net gain that is required to be achieved for a protected matter, otherwise the amount of net gain will be determined by the Minister.

To guide proponents in the determination of net gain requirements, an Offsets Calculator will be released to help determine the net gain requirement or compensation obligation associated with a residual significant impact, assess the suitability of an offset proposal, and calculate restoration contributions. The calculator will evaluate time horizons, the risk of loss, changes in habitat and vegetation quality over time, and confidence in input data to estimate the proportion of the residual significant impact that must be offset.

The policy position of 'net gain' represents an increase in expectation on project proponents when compared to the current policy setting of 'no net loss.' It is also departure from the Commonwealth Government's previously held policy position of 'nature positive,' which was embedded within the Government's earlier iteration of reforms to the EPBC Act under the Nature Positive Plan (see our previous update here). Under that framework, nature positive was defined as 'an improvement in the diversity, abundance, resilience and integrity of ecosystems from a baseline'. 

How to deliver net gain

The Reform Act expressly allows the Minister to attach conditions to an approval to specifically include a condition to compensate for any damage to a protected matter that has, may, or will be caused by the significant impact from the action.

The Reform Act gives proponents a choice in how to deliver net gain, with two distinct pathways that will suit different projects and business models. The Minister can attach conditions to the approval that:

Pathway 2: Payment of a restoration contribution charge

Under this approach, to meet residual offset compensation obligations, proponents will be able to pay a charge to an independent statutory office, the Restoration Contributions Holder (RCH), who will be empowered to use the funds to deliver restoration actions that achieve net gain.

The Minister can attach a condition to the approval that requires the approval holder to pay a restoration contribution charge for the residual significant impact of the action, but only with the consent of the approval holder. The Minister cannot unilaterally impose a condition on the approval holder to pay a restoration contribution charge, or do so where the protection statement for the threatened species or community states that a restoration contribution charge should not exist.

The RCH is required to spend an amount that reasonably relates to the amount of restoration contribution charge imposed to deliver a general restoration action to compensate for the residual significant impacts. A general restoration action is a restoration action that the RCH is satisfied is directed towards protecting, conserving or restoring the affected matter in the bioregion where it is located, which will result in a net gain for the affected matter in that bioregion, and complies with the requirements (if any) prescribed by the regulations. If general actions are not feasible or would not deliver the best outcome, the RCH may fund alternative actions that benefit the same type of protected matter, preferably in the same bioregion.

The RCH can pool charges from multiple projects to fund larger restoration actions, provided this achieves better environmental outcomes for all affected matters. This allows the RCH to aggregate restoration contribution charges from multiple projects to fund larger, more strategic restoration actions that deliver better outcomes than multiple small, fragmented actions.

The RCH must consult with a new oversight committee known as the Restoration Contributions Advisory Committee. The RCH will also be required to maintain a public register of funded actions to ensure transparency and accountability. 

The amount of the restoration contribution charge will be determined in accordance with a method to be prescribed by future regulations and will be able to be estimated through the Offsets Calculator.

Biodiversity Certificates under the Nature Repair Act

The Reform Act also opens the door for biodiversity certificates under the Nature Repair Act 2023 (Cth) (Nature Repair Act) to be used as offsets. Under the Nature Repair Act, biodiversity certificates can be created and sold in respect of actions which deliver biodiversity improvements or protections.

This marks a significant shift from the Government's previous position. Under the Nature Repair Act, biodiversity certificates are currently excluded from environmental offsets. This exclusion was intended to reinforce the Government's earlier Nature Positive Plan, whereby biodiversity certificates could only be created for projects that directly protected or restored nature, rather than compensating for biodiversity impacts on a species or ecosystem occurring elsewhere. This position was fundamental to securing support for the passage of the Nature Repair Bill 2023 (Cth) by the Greens through Parliament.

The Reform Act amends the Nature Repair Act to allow methodology determinations to specify whether biodiversity certificates issued in respect of registered biodiversity projects can be used for environmental offsetting purposes and outline any requirements for doing so. 

This will provide additional flexibility as to how the net gain requirements in the Reform Act can be achieved, whilst also ensuring offsets are delivered through a robust legislative framework which is designed to ensure gains are transparent, measurable and enforceable. It may also assist in solving a fundamental challenge with the operation of the nature repair market to date, which is a lack of demand for biodiversity certificates. 

Watch this space

• Restoration contribution fund – meaningful restoration or added complexity? The establishment of a national environmental restoration fund aims to deliver coordinated, strategic, bioregional environmental outcomes while providing developers with an efficient avenue to meet regulatory requirements. This should mean that restoration activities are more targeted at addressing the actual drivers of the decline protected species and communities, much more so than individual offset sites could ever hope to do. It is an approach that mirrors state-based funds in NSW and Queensland, which have had mixed success. Whilst these funds offer efficiency and strategic pooling of resources, concerns remain about delivery timeframes, transparency in fund allocation, and whether restoration outcomes are achieved on the ground. Proponents will need to weigh the benefits of retaining control through direct offset delivery against leveraging the RCH's strategic capacity. The success of the RCH will ultimately depend on the cost associated with utilising the mechanism compared to direct delivery of offsets, the extent to which the RCH can leverage developed and informative bioregional plans to channel funding into restoration actions which will produce meaningful outcomes greater than individual offsets might be able to do, and transparent governance and reporting.
• Nature repair market or direct EPBC offset – which pathway offers greater value? The net gain requirement may drive demand for offset projects as proponents must comply with heightened requirements beyond 'no net loss'. This creates strategic choices for offset providers and project developers about how to structure and monetise restoration projects. In particular, offset providers will need to carefully consider whether to deliver offsets directly to EPBC approval holders (either as advanced offsets or in response to a project), register projects through the Nature Repair Market and issue biodiversity certificates or deliver outcomes in collaboration with the RCH. These pathways have different registration requirements, transaction costs and compliance risk profiles. Project developers will need to carefully evaluate these trade-offs and consider how to best approach and monetise offset opportunities in this evolving landscape, particularly as the regulatory interaction between the EPBC Act and Nature Repair Act develops, and market precedents emerge. It is notable (and welcome) that the Draft Offset NES suggests that it will be possible to have an offset site registered as an advance offset and then transfer the site to be regulated under the Nature Repair Market, which provides flexibility and liquidity to offset site providers.
• Non-realisation of biodiversity outcomes – who bears the risk? The shift to net gain and the expected increased reliance on offset markets raises critical questions about risk allocation. Where offsets are delivered by third-party offset providers under the direct offset pathway, the Reform Act establishes a framework requiring conditions to achieve net gain but provides no explicit mechanism for enforcement or recourse against those third-party offset providers if offset sites subsequently degrade or promised outcomes are not realised over time. To cover the risk, proponents purchasing offsets from third-party providers may seek contractual protections to cover scenarios where purchased offsets fail and the proponent faces enforcement action for non-compliance with offset conditions in their approval. Given the consequences of non-compliance can be significant, such an approach can significantly expose offset providers to risk and distort the risk-reward equation for them, such that the potential liability of delivering an offset outweighs the reward. This may lead to market distortions, inefficient risk pricing, complex contractual arrangements and increased transaction costs, all of which may ultimately act as a disincentive to participation in offset projects. The Nature Repair Market may provide a neat solution to this problem, but the nascent status of the market will mean it may take time for this framework to become more market standard.
• Carbon stacking – opportunity or uncertainty? The Samuel Review recommended leveraging existing markets when delivering offsets under the EPBC Act by stacking biodiversity and carbon credits on the same land parcel. Whilst carbon stacking is contemplated under the Nature Repair Act, the Reform Act remains silent on whether EPBC Act offsets can be used to obtain certificates and credits under carbon markets. This creates uncertainty as to whether proponents can maximise restoration values through integrated biodiversity and carbon projects, or must choose between these markets.
• Capacity constraints – can the market meet demand? The shift to net gain will likely increase demand for land restoration, offset delivery and restoration services. Various skillsets are required to appropriately manage and deliver biodiversity offset sites, requiring proficiency in natural resource management, ecological management, reporting and compliance, all whilst dealing with seasonality-related fluctuations and events such as floods and droughts. This is typically not business-as-usual for proponents of projects that require approval under the EPBC Act to undertake these actions, so a market of independent landscape restoration companies has developed to meet that demand. The market of providers who see nature repair or land restoration as their core business is small and nascent. Moreover, complex ecological restoration at scale requires supply chains in areas, such as native seed stock supply, which do not currently exist in Australia at the depth required to deliver long-term and sustained restoration actions at scale. These capacity constraints may increase costs in delivering offsets and delay projects, ultimately undermining biodiversity outcomes.