The Government has released a proposal to increase the thresholds for determining what constitutes a large proprietary company under the Corporations Act 2001.
Large proprietary companies are required to prepare and lodge an audited financial report, a director’s report and an auditor’s report with the Australian Securities & Investments Commission (ASIC) each financial year.
The thresholds have not been adjusted since 2007 and the update is hoping to reduce the reporting burden small and medium businesses face.
The existing and proposed new thresholds for large proprietary companies under the Corporations Act 2001 are summarised in the table below. At least two out of three of the thresholds must be met in order to be a large proprietary company.
|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.|
If the proposal goes forward, the new thresholds will apply to financial years commencing on or after 1 July 2019.
Impacts of the proposal
The anticipated impacts of the proposal include:
- Approximately 1/3 of proprietary companies that are currently large will no longer be classified as large, and will therefore no longer be required to report.
- The regulatory cost for these companies is expected to reduce by $81.3 million annually.
- Small proprietary companies will still be required by law to keep written financial records and may be required to prepare or audit financial reports if directed by ASIC or 5% or more of their shareholders.
- All other corporate obligations that apply to propriety companies will continue to apply.
Despite the potential changes, large proprietary companies have the discretion to continue preparing audited accounts.
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