ASIC is increasing its crackdown activity for businesses whose reporting requirements have changed due to growth.
ASIC is in the midst of a concerted campaign targeting private companies that have outgrown the reporting exemptions. 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.
ASIC requires companies to prepare and lodge a financial report and a directors' report each financial year, and have the accounts audited unless the company is exempt. Most small companies are exempt from the compliance requirements as are small foreign owned companies in certain circumstances.
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.
Small companies are exempt if they satisfy 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.
If you don't meet the small company criteria, then you are a large company and are required to lodge audited financial statements. Failure to lodge annual accounts with ASIC may result in penalties and potentially the company being deregistered. There is an exemption for companies not controlled by a foreign entity or disclosing entities.
One consideration to be aware of if you are tapped for an audit: The auditor is likely to want to see your accounts and financials for previous years when your business was still considered a small company.
Small companies controlled by a foreign company may also be exempt in some circumstances.
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 exempt may be deregistered.
Again, if you have a requirement to lodge financial statements with ASIC, they must be audited.
If you are uncertain about the requirements for your company, please contact us on 02 9957 4033 and we'll work with you to ensure your company is compliant.
This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.