ASIC targets “large” entities for late financial reporting, steep penalties for non-compliance

The Australian Securities and Investment Commission (ASIC) – the government body responsible for overseeing and enforcing laws relating to companies and financial services in Australia – is cracking down on qualifying companies that fail to lodge financial reports on time. 

Companies required to lodge financial reports to ASIC

While some companies prepare financial reports voluntarily, qualifying businesses are required to lodge a financial report with ASIC each year.

This includes proprietary companies that meet at least two of the following (with thresholds measured across the company and every entity it controls):

• Has a consolidated revenue for the financial year of $50m or more, measured across the whole year.
• Has consolidated gross assets at the end of the financial year totalling $25m or more, measured at the balance date.
• Has 100 or more employees at the end of the financial year, measured at the balance date.

It is important to note when it comes to headcount of employees (criteria three), employees who work part-time and/or on a casual basis, must be counted as a fraction of a full-time equivalent – a number that is not typically in the payroll system.

Consolidated revenue and assets numbers need to comply with Australian Accounting Standards. Various reliefs and exemptions are available, which we explain in our article on reporting obligations in Australia.

In the 2026 Federal Budget, the government proposed to double the thresholds for consolidated revenue and gross assets to $100m and $50m respectively. However, these increases are currently under consultation and are not yet law.

What lodgement with ASIC involves

Where two or more of the criteria apply, the company is required to:

• Prepare a financial report and a directors’ report
• Have the financial report audited
• Distribute both reports to members
• Lodge with ASIC within four months of year end

This means for companies with a 30 June balance date, the entire process including the ASIC lodgement is due by 31 October. Lodging a tax return does not negate this requirement.

It is also worth remembering that the requirement to lodge with ASIC is assessed each year. Just because a company was required, or not required, to lodge in one year does not mean the same is true for the next. This is also the case with any lodgement exemptions. The grandfathering exemption that allowed certain large proprietary companies to avoid lodging financial reports with ASIC was removed in 2022. Businesses should revisit their reporting obligations each year to understand what they need to do to comply.

The penalties for non-lodgement can be significant

The days of treating late lodgement penalties as a minor compliance cost are over. A single late lodgement can now attract a penalty of $218,400, with costs escalating quickly for companies with multiple years of overdue reporting.

Lodgement preparation can take longer than you expect

For companies with established reporting processes, meeting the requirement is often relatively straightforward.

For businesses lodging for the first time, particularly those that have grown and are suddenly subject to mandatory reporting, implementing the systems and controls needed to support compliance can be a lot more demanding than anticipated.

This is because much of the complexity sits behind the reported figures, and specific accounting estimates and judgements can have a material effect on numbers reported.

If we consider a mining services company as an example, how are amounts charged to customers for labour hire, fuel, freight and subcontractor recoveries recognised under the accounting standards (gross or net)? When should revenue from long term contracts be recognised? Should contract variations and claims be included in revenue? These accounting estimates and judgements can ultimately change reported revenue and asset amounts and whether a company ends up meeting the threshold.

The structure of the business is also an important consideration. Many privately held businesses trade through unit and discretionary trusts with a corporate trustee. Because the corporate trustee must consolidate trusts under its control, a trustee company with negligible revenue of its own can be large on a consolidated basis. When it comes to joint ventures, the nature of the arrangement can determine whether a partner’s share of revenue and assets enters their size test at all. Relationships between domestic or foreign parent companies also play a role.

Act early to minimise risk

If you suspect you have already missed a lodgement, taking early action can help to mitigate some of the damage. This is because the process does take time to get right, and a company that discovers in October that it should have been reporting cannot realistically appoint an auditor, resolve opening balances, and lodge by 31 October.

FOR MORE INFORMATION

For a confidential discussion about your reporting position, and how we can support you in moving forwards, please contact the audit and assurance team at your local RSM office.