Recent changes to the Corporations Act 2001 remove the need for many companies to lodge annual financial accounts with ASIC.
With effect from 1 July 2019, the criteria in the Corporations Act 2001 for classification as a "large proprietary company" have been changed. The revenue, asset and employee thresholds that determine whether a proprietary company is considered "large" will double.
Why is this important?
Large proprietary companies are required to prepare and lodge an annual financial report, a director's report and an auditor's report with ASIC each financial year. This can be both costly and time consuming.
In addition, reports that are lodged with ASIC become publicly available documents - so competitors and customers can easily access sensitive, private financial information about a company.
If a company is required to lodge the required reports but fails to do so, penalties can be imposed on the company and its officers.
Avoiding the requirement to lodge financial reports with ASIC will not only save a company time, money and effort, but will also keep private financial information confidential. With some exceptions, small proprietary companies generally do not need to comply with these requirements to lodge (but are required to keep sufficient financial records).
So, it pays to be small!
What is the change?
The Corporations Amendment (Proprietary Company Thresholds) Regulations 2019, which will commence on 1 July 2019, amend the definition of "large proprietary company" by doubling the current revenue, assets and employee thresholds. A proprietary company will be "large" if it meets two of the three thresholds at the end of its financial year, as shown in the table below:
The doubling of the thresholds will relieve many proprietary companies from the ASIC reporting obligations. The Federal Government estimates the changes will reduce SME regulatory compliance costs by $81.3 million annually, with a third of proprietary companies currently classified as large expected to fall below the new mandatory reporting thresholds.
What should you do now?
If your company is currently classified as a large proprietary company you should closely consider the revenue, gross assets and employee thresholds to determine whether the company may fall below the increased thresholds from 1 July 2019. If so, your company may be relieved from the time and costs associated with the compliance obligations of a large proprietary company. And you can keep your private financial information out of the hands of your customers and competitors!
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.