On 16 November 2018, the Coalition Government announced proposed increases to the thresholds relevant to determining a proprietary company's status as a large proprietary company.
Large proprietary companies are subject to the financial reporting and audit requirements under Chapter 2M of the Corporations Act.
Currently, proprietary companies are considered to be ‘large’, for the purposes of ASIC reporting requirements, if they meet at least any two of the following three thresholds for a given financial year:
- $25 million or more in consolidated revenue;
- $12.5 million or more in consolidated gross assets; or
- 50 or more employees.
These ‘large’ proprietary companies are required to prepare and lodge a financial report, a director’s report and an auditor’s report with ASIC each financial year.
Under the proposed changes, the thresholds will be doubled as follows:
- $50 million or more in consolidated revenue;
- $25 million or more in consolidated gross assets; or
- 100 or more employees.
It is anticipated that around a third of large proprietary companies (2,200 out of approximately 6,600) will no longer be classified as large and will therefore no longer be required to comply with financial reporting and audit requirements.
The existing thresholds have not been reviewed since 2007 and the proposed reforms will ensure the thresholds keep pace with economic growth and that financial reporting obligations are targeted at larger, more economically significant companies. Increasing the thresholds will also reduce costs for proprietary companies that would no longer be required to lodge financial reports with ASIC.
The proposed changes are currently subject to exposure draft regulations, open for public consultation until 14 December 2018. More information is available from the Australian Government Treasury website.