Update Large Private Companies – Recent Regulatory & Reporting Changes

11 August 2022

This update alerts you to two important regulatory changes to private companies that were given Royal Assent on 9 August 2022.

These changes may have a significant impact if you have in the past fallen under the existing exemptions and thresholds in terms of lodging financials statements to ASIC and transparency tax reporting to the ATO.

We summarise the key changes below.

Reduction of the Transparency Reporting Threshold for Large Private Companies

In order to increase transparency, the Commissioner is required to publish and make publicly available tax information for Australian corporate tax entities. Under previous legislation the ATO published information for:

• Australian-owned public or foreign-owned companies with total income of equal to or greater than $100 million
• Australian-owned private companies with total income of equal to or greater than $200 million

Effective 1 July 2022 the tax information reporting threshold for Australian-owned private corporate tax companies will be reduced from $200 million to $100 million of total income, which aligns the threshold with Australian-owned public entities. Total income is based on disclosures in the entity’s income tax return for the relevant income year.

The tax information reported publicly includes the company’s:

• name,
• ABN,
• total income for the year,
• taxable income or net income (if any), and
• income tax payable (if any).

Start date: The law relating to this change received Royal Assent on 9 August 2022 and the new thresholds will apply to all Australian-owned private entities effective for FY22-23 onwards.

Removal of Relief for Exempted Grandfathered Large Proprietary Companies to Lodge Annual Reports

The Corporations Act may require a large proprietary company to lodge annual financial statements with ASIC. These reports are available for the public to download and access.

Currently, a large proprietary company may be eligible for an exemption from the requirement to lodge annual reports with ASIC, if it satisfied the grandfathered exemption conditions. The government recently reviewed the exemption for large proprietary companies and determined that it should be removed, with the objective of aligning all companies with the same lodgement and transparency requirements.

Criteria for Being a Large Proprietary Company 

A proprietary company will be classified as large if it satisfies at least two of the following thresholds: 

Start date: Accordingly, if you were previously a grandfathered large proprietary company, for financial years on or after the 9 August 2022, you will now need to lodge audited financial statements with ASIC within 4 months of year-end. For the affected companies, they continue to be exempt from lodging an annual report with ASIC for the financial year ended 30 June 2022.

Next Steps

These two amendments will result in increased transparency for many large private corporate entities in Australia. It is critical that clients consider their position and how the rules apply to ensure compliance.

Please contact your Cooper Partner’s engagement team to review your situation and determine what action is required.

Authors:
Michelle Saunders, Managing Director
Amy Carter, Senior Consultant Private Client Services

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This newsletter is current as of 11 August 2022, however, please note that announcements and changes are being made by the Government and the ATO regularly, and we expect that the tax and business-related responses will continue to evolve.  Before acting upon the content of this newsletter, please contact us to discuss how the above applies to your specific circumstances.

This information is general advice only and neither purports, nor is intended to be advice on any particular matter.
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