Large proprietary companies: Significant changes to financial reporting thresholds

From 1 July 2019, the thresholds for determining whether an Australian proprietary company is considered a ‘large’ proprietary company under the Corporations Act 2001 (Cth) (Act) will increase. This is the first time the thresholds will have been adjusted since 2007.  Companies that will no longer be classified as large proprietary companies will have a reduced compliance burden.

Summary of the changes

Following the changes, a proprietary company will be considered a ‘large’ proprietary company if it satisfies at least two of the following three thresholds:

  • annual consolidated revenue of $50 million or more (an increase from $25 million);
  • consolidated gross assets of $25 million or more (an increase from $12.5 million); and
  • employees of 100 or more (an increase from 50).

The thresholds apply to a financial year. In determining whether the thresholds have been satisfied, the consolidated revenue, consolidated gross assets and employees of the company and its controlled entities are to be considered.

Effect of the changes

The Commonwealth Treasury predicts that the changes will result in approximately one-third of existing large proprietary companies being re-classified as ‘small’ proprietary companies for the purposes of the Act. Small proprietary companies are subject to significantly less onerous financial reporting obligations under the Act than large proprietary companies.

The changes will be welcomed by any companies that are re-classified as small proprietary companies.

Financial reporting obligations unaffected

It is important to note that the changes to the thresholds do not affect the respective financial reporting obligations that apply to large and small proprietary companies under the Act.

Large proprietary companies are required to prepare and lodge with ASIC an audited financial report, director’s report and auditor’s report on an annual basis. Further information about these requirements is set out in Division 1 of Part 2M.3 of the Act.

Small proprietary companies are only required to keep written financial records and there are no audit or lodgement requirements (unless required to do so under section 292(2) of the Act, including upon direction by ASIC or by at least 5% of the company’s shareholders).

Please contact us should you have any questions about the changes to the thresholds for determining whether a proprietary company is a ‘large’ proprietary company under the Act.


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