Regulatory Activity: Large proprietary company thresholds doubled

July 2019

The Commonwealth Government’s proposal to double the reporting thresholds for ‘large’ proprietary companies became law on 4 April 2019. The relative size of a company is a key determining factor of a proprietary company’s reporting obligations. Depending on its assets, revenue and employees, an entity will be classified as either ‘small’ or ‘large’.

Large proprietary companies generally have increased reporting requirements as Part 2M.3 of the Corporations Act 2001 (the Act) requires most large proprietary companies to prepare and lodge audited financial statements with the Australian Securities and Investments Commission (ASIC).

In contrast, small proprietary companies are generally required to keep sufficient financial records and are only required to prepare and lodge audited financial reports if directed to do so by ASIC or 5% or more of their shareholders.

What has changed?

Section 45A of the Act contains the size thresholds for classifying a proprietary company as either small or large. The last time these thresholds changed was in 2007. Corporations Amendment (Proprietary Company Thresholds) Regulation 2019 amends section 45A by increasing the size thresholds as follows:


A proprietary company is considered to be large when it meets at least two of the above three criteria.

Why did the thresholds change?

The reasons for doubling the thresholds were set out in the Explanatory Memorandum that accompanied the Regulation revising the thresholds. These included:

  • Increasing the revenue and assets thresholds to account for nominal economic growth since 2007; and
  • Ensuring that financial reporting obligations are targeted at economically significant companies, while reducing costs for smaller-sized

The number of employees was cited in the Explanatory Memorandum as being a relevant indicator of the size and significance of a company, therefore it was considered appropriate to double this threshold too.

How are the criteria measured?

There have been no changes to how the above criteria are measured. ‘Consolidated’ means the revenue, assets and employees of the company and the entities it controls for, or at the end of, the financial year, even if the company does not produce consolidated financial statements. In working out number of employees, part-time employees are taken into account as an appropriate fraction of a full-time employee.

Importantly, revenue and gross assets are measured by applying all accounting standards, including any new accounting standards such as AASB 16 Leases which is effective for annual reporting periods beginning on or after 1 January 2019. Where an entity is the lessee in leases previously classified as operating leases, the impact of the new standard will be an increase in gross assets recognised on the balance sheet. Entities should carefully consider the impact of AASB 16 on their balance sheets in assessing whether they are small or large, especially where they are close to the revised thresholds.

When do the new thresholds apply?

The new thresholds apply to financial years beginning on or after 1 July 2019. That is, for entities with 30 June year ends, the new thresholds will apply to the year ended 30 June 2020 and later financial years. Entities with financial years ending in 2020 before 30 June 2020 (for example, 31 March 2020) will still be subject to the old thresholds.

Cutcher & Neale Audit and Assurance Services is a representative firm of the HLB Mann Judd Australasian Association.

Topics: Audit, Financial Reporting

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