These changes were passed into law in May 2019 and will come into effect from 1 July 2019 onwards.

Proposed changes to the Corporations Act 2001 will mean that many small and medium businesses will no longer have to lodge annual financial reports.

Under current legislation, a company must prepare and lodge an audited financial report with the Australian Securities and Investment Commission (ASIC) if it meets two out of three 'large' thresholds for revenues, gross assets, and employees. 

The Treasury has announced a consultation on proposals to double each of the thresholds.  This is expected to remove the 'large' status from over 2,000 proprietary companies – over 30% of those currently considered large. Financial reporting requirements

Any companies that are no longer 'large' under the increased thresholds will not have to prepare financial reports unless they are directed to, either by 5% of the shareholders or by ASIC.

The change in thresholds would apply to financial years beginning on or after 1 July 2019, meaning that affected companies would not have to lodge accounts for years ended 30 June 2020 or subsequent years.

Thresholds for 'large' companies under the Corporations Act 2001

A company is large if it meets two of the three thresholds:

 

Current

From 1 July 2019

Revenue

$25m

$50m

Gross Assets

$12.5m

$25m

Employees

50

100

Commenting on the proposed changes, Ralph Martin, RSM’s National Technical Director, said:

“The proposed changes are a sensible step, given that there has been no change to these thresholds since 2007. The proposals will be a welcome reduction in the regulatory burden for some medium-sized businesses. Many of the affected businesses may choose to continue preparing a financial report to meet the needs of investors or lenders, but they will now have the freedom to choose when and how this information is presented.”

For more information on financial reporting requirements:

For more information on how the reduced financial reporting requirements may affect you, contact your local RSM adviser today.