ASIC is in the midst of a concerted campaign targeting private companies that have outgrown the reporting exemptions – ie are no longer classified a ‘small company’.
What is a small company?
Small Company Exemptions exist if the company satisfies at least two of the following:
- The consolidated gross revenue for the financial year for the company and any entities the company controls is less than $25 million
- The value of consolidated gross assets at the end of the financial year of the company and any entities it controls is less than $12.5 million, and
- The company and any entities it controls have fewer than 50 employees (full time equivalent) at the end of the financial year.
Don’t satisfy at least two of the above exemptions? Or satisfy the foreign controlled company exemption (see below)? Then you are no longer exempt from ASIC reporting requirements, and are required to lodge financial report and a directors’ report each financial year, and have the accounts audited.
Utilising data from the Australian Taxation Office (ATO), ASIC is contacting companies that have moved beyond or not complied with the exemption and are now in breach of their reporting requirements.
If your company has never had to lodge financial reports with ASIC in the past, it’s very easy to breach the rules without realising it. The reporting requirements are hard and fast and ASIC is not overly sympathetic to “oops” as a reason for a breach.
Failure to lodge annual accounts with ASIC may result in penalties and potentially the company being deregistered.
The rules for foreign controlled companies
Small companies controlled by a foreign company may also be exempt in some circumstances.
For small companies that are not part of a large consolidated group, the directors must resolve to rely on relief provided by ASIC and lodge this resolution (form 384). Timing is everything to be eligible for this exemption, if the right form is not lodged between the period starting 3 months prior to the start of the financial year relief is first applied and ending 4 months after the end of the relevant financial year, the exemption is unlikely to apply.
ASIC warns that, “in most cases, relief is not granted for financial reports that were due in the past”.
Foreign companies that fail to lodge the appropriate financials and are not xempt may be deregistered.
Again, if you have a requirement to lodge financial statements with ASIC, they must be audited.