Critical habitats relate to protecting and preserving the habitats of threatened species but despite there being more than 1700 threatened species and ecological communities across the country, the government has only identified five critical habitats.
ACF healthy ecosystems campaigner Jess Abrahams said it was "ridiculous" no critical habitat had been listed on the register for any species since 2005.
"Our current law provides patently inadequate protection to prevent the destruction of critical habitat," Ms Abrahams said in a statement last week.
"Without proper protections, beloved species like the leadbeater's possum could well be extinct within a few years. If we're going to protect our native species we must fix these laws and we must do it now."
The report warns that if the government continues to fail to protect critical habitats, Australia will fail to meet its international obligations to conserve nature.
The foundation's report makes several recommendations including the establishment of new national environmental laws, a new national critical habitat register and the establishment of an independent environmental agency.
It's also called on the government to create a $200 million annual threatened species fund to directly help with recovery plans for threatened species.
Federal environment minister Josh Frydenberg has been contacted for comment.