ASIC reporting thresholds doubled to cut red tape

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ASIC reporting thresholds doubled to cut red tape

The federal government has doubled the thresholds that define a business as ‘large’ in a bid to ‘cut red tape’ and reduce the number of companies required to submit financial reports to the Australian Securities and Investments Commission (ASIC).

The federal government has doubled the thresholds that define a business as ‘large’ in a bid to ‘cut red tape’ and reduce the number of companies required to submit financial reports to the Australian Securities and Investments Commission (ASIC).

Propriety companies classed as ‘large’ must prepare and lodge a financial report, a director’s report and an auditor’s report with ASIC each financial year.

About 6600 of Australian proprietary companies currently fall within the ‘large’ category. The new thresholds mean about a third of these will no longer fall within the ‘large’ category and will not be required to comply with financial reporting and audit requirements. 

The government estimates this will save small and medium-sized businesses a total of more than $300 million over the next four years. This is because the average annual cost per business to prepare auditing financial reports is about $36,950, adding up to a total of $81.3 million for all Australian companies. 

Defining ‘large’ businesses
 

According to Treasurer Josh Frydenberg, the threshold changes will ensure companies are able to deploy their resources to grow their business and employ more people.

“Small businesses are the engine room of the economy, we have more than three million of them in Australia and they employ around 70 per cent of all private sector employees,” said Mr Frydenberg. “What we want to do is cut red tape, so that they pay less money to their lawyers and their accountants and they can employ more people with that money that otherwise would have gone to them.”
 
The thresholds have remained the same since 2007. Currently a company is considered ‘large’ for the purposes of ASIC reporting requirements if it meets at least 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 thresholds will double to become $50 million or more in consolidated revenue; $25 million or more in consolidated gross assets; and 100 employees or more. 
 
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 five per cent or more of their shareholders.
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