The Government has announced it will reduce the reporting burden for small and medium businesses operating via a company structure by raising financial reporting thresholds which have not been adjusted since 2007.
Large proprietary companies are required to prepare, have audited and lodge a financial report, a Director’s report and an Auditor’s report with ASIC each financial year.
The current and proposed new thresholds for large proprietary companies for the purposes of ASIC reporting requirements are summarised below:
|Current thresholds||Proposed thresholds|
|$25 million or more in consolidated revenue||$50 million or more in consolidated revenue|
|$12.5 million or more in consolidated gross assets||$25 million or more in consolidated gross assets|
|50 or more employees||100 or more employees|
At least any two of the above thresholds for a given financial year must be met or exceeded in order to be considered ‘large’. These thresholds are applied on a grouped basis where there are multiple companies in Australia under common ownership/control.
The increased thresholds will likely reduce compliance costs for smaller sized companies that will no longer be required to lodge audited financial reports with ASIC. At this stage, the Exposure Draft appears to change the thresholds for all proprietary companies. As such, we expect the changes will therefore include the Australian subsidiaries of multi-national corporations who are currently taking advantage of the relief from reporting provided under ASIC Corporations (Foreign-Controlled Company Reports) Instrument 2017/204.
Prima facie, all foreign-owned companies irrespective of size must prepare, have audited and lodge a financial report, a Director’s report and an Auditor’s report with ASIC each financial year.
However, under ASIC Corporations (Foreign-Controlled Company Reports) Instrument 2017/204, ‘small’ foreign-owned companies can initially lodge an ASIC Form 384: “Resolution by directors of small proprietary company controlled by a foreign company which is not part of a ‘large group’’’ to obtain ASIC reporting relief. In subsequent years, provided the relevant companies continue to be ‘small’ in accordance with the reporting thresholds detailed above, these companies can simply make an annual Directors resolution (to be made within 4 months of the end of the financial year and held on the company’s register) stating they seek to adopt the relief provided under ASIC Corporations (Foreign-Controlled Company Reports) Instrument 2017/204.
Small proprietary companies are still required by law to keep written financial records and may be required to prepare (or have audited) financial reports if directed by ASIC or by 5% or more of their shareholders. All other corporate obligations that apply to proprietary companies will continue to apply.
The new Regulations are proposed to commence on 1 July 2019 and apply in relation to the financial years beginning on or after 1 July 2019.
In the meantime, Treasury has released the Exposure Draft Legislation and Explanatory Statement for consultation, with stakeholders invited to comment and make submissions by 14 December 2018.