The Federal Government has recently released a proposal to increase the thresholds for determining what constitutes a large proprietary company under the Corporations Act 2001.
Currently, companies that meet the thresholds, and are therefore large proprietary companies, are required to prepare and lodge an audited financial report, a director’s report and an auditor’s report with ASIC each financial year. The Government proposes to change these reporting thresholds by way of Regulation, meaning the changes can be effected without amendments to the Act Itself.
The draft regulations propose to increase the thresholds as follows:
- the consolidated revenue for the financial year of the company and the entities it controls from $25 million to $50 million;
- the value of the consolidated gross assets at the end of the financial year of the company and the entities in controls from $12.5 million to $25 million; or
- the company and the entities it controls having 50 employees to 100 employees at end of the financial year.
The above changes are proposed to take effect for financial years beginning on or after 1 July 2019.
Increasing the thresholds are significant as it will reduce the number of proprietary companies that are required to report under the Corporations Act 2001 and will also have implications on the AASB’s current proposals regarding the removal of Special Purpose Financial Reports (“SPFR”) for entities required by legislation or otherwise to prepare financial statements. It also pre-empts the government’s response to the recommendations from Treasury’s Legislative Review of the Australian Charities and Not-for-Profit Commission Act 2012 regarding financial reporting thresholds and financial statement requirements for registered charities.
Public submissions on the Government’s draft regulations and explanatory statement are open until 14 December 2018.
The proposed changes will not affect companies’ 30 June 2019 financial reporting.
If you have any questions, or would like any information on what these proposed changes mean for you, please contact a Nexia Advisor.