The Government has released for public consultation exposure draft regulations and an explanatory statement containing proposals to reduce the financial reporting burden for some proprietary companies by increasing the thresholds for determining what constitutes a large proprietary company under the Corporations Act 2001. Currently, companies that meet the thresholds are required to prepare and lodge an audited financial report, a director’s report and an auditor’s report with the Australian Securities and Investments Commission each financial year. The exposure draft regulations propose to increase the thresholds as follows:
- the consolidated revenue for the financial year of the company and the entities it controls from $25 million to $50 million;
- the value of the consolidated gross assets at the end of the financial year of the company and the entities in controls from $12.5 million to $25 million; or
- the company and the entities it controls having 50 employees to 100 employees at end of the financial year.
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 reduce costs for proprietary companies that would no longer be required to lodge financial reports with ASIC. Increasing the thresholds will reduce the number of proprietary companies that are required to have in place a whistleblower policy under the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 (if passed by Parliament). It will not impact the whistleblower protections afforded to employees of these companies. Stakeholders are invited to comment on the exposure draft regulations and explanatory statement.