In the mid 1990’s a number of large proprietary companies were grandfathered under transitional arrangements from having their audited Financial Statements being required to be lodged with the Australian Securities Industries Commission (ASIC). In other words, preventing the company’s private trading affairs being freely available for the public and competitors to review and analyse.
Existing companies were exempt in the name of fairness to those shareholders so that the rule changes could not be said to be retrospectively imposed. Retrospect legislation imposed by governments has never been a popular move and generally not well received.
Now in 2022, the measures are now called a loophole and shelter for around 1,500 companies receiving preferential treatment compared to large proprietary companies formed after 1995.
The current definition of a large proprietary company under the Corporations Act 2001 is a company that satisfies at least two the following tests:
- The consolidated revenue for the financial year of the company and its entities it controls is $50 million or more
- The value of the consolidated gross assets at the end of the financial year of the company and its entities it controls is $25 million or more, and
- The company, and any entities it controls, have 100 or more employees at the end of the financial year.
In the August 2022 sitting of parliament, a bill was passed to lower the threshold for corporate tax transparency reporting for companies now reporting down to $100 million in turnover. The bill is passed and is awaiting assent.
The ATO will make publicly available tax information about an entity if the turnover is over $100 million and a corporate entity. Types of information to be published include total income, taxable income, and income tax payable.
During the senate sitting, among amendments proposed and agreed to put forward by the Greens was to remove the ASIC reporting exemption which effectively abolished the 1995 grandfathering of large proprietary companies.
This is just another measure lifting the veil of private company affairs and reinforces that fact the “private” in a company classification is not referring to the fact the public and competitors cannot scrutinise the companies’ activities and it is probably time to reconsider this term.
Contact your local Accru office to discuss this topic further or find out more information.