Small and large proprietary companies redefined
1 August 2019
From 1 July 2019, changes to the definition of ‘small’ and ‘large’ proprietary companies will have a significant impact on the reporting obligations of SMEs.
All proprietary companies need to be aware of these changes, especially when considering whether they trigger the new threshold requirements.
The current thresholds for determining large proprietary companies have doubled with effect from 1 July 2019. The increase in thresholds mean that a proprietary company will be considered ‘large’, for a financial year, where it satisfies at least 2 of the following thresholds:
$50 million or more in consolidated revenue;
$25 million or more in consolidated gross assets; or
100 or more employees.
Further, when counting employees for the purposes of the third threshold, part-time employees are taken into account as an appropriate fraction of a full-time equivalent.
What does this mean for your Business?
The Corporations Act 2001 (Cth) imposes a number of reporting obligations on large proprietary companies, including lodging an annual financial report, directors’ report and auditor’s report with ASIC. Generally, small proprietary companies are only required to maintain “sufficient” financial records unless they are directed by ASIC or their shareholders to prepare financial and directors’ reports.
The changes to the threshold requirements will relax the reporting requirements of companies previously defined as ‘large’ but which do not meet the new thresholds.
To take advantage of the more relaxed reporting requirements, companies need to consider whether they are likely to satisfy at least 2 of the new threshold requirements. Typically the employee threshold is something external legal and accounting advisers will have less visibility over so it is incumbent upon directors, executives and senior management to consider this and, if appropriate, raise the matter with your professional advisers.
If you need any advice regarding the new thresholds and what they mean for your business, get in touch and let us help you.