The requirements in the Corporations Act
(2001) that exempted grandfathered large proprietary
companies from lodging financial statements with ASIC has been
removed and the tax transparency threshold for proprietary
companies will be reduced to $100 million.
The Treasury Laws Amendment (2022 Measures No. 1) Bill 2022 has passed both Houses of Parliament and proposes to:
- Remove the exemption in the Corporations Act (2001) that previously exempted grandfathered large proprietary companies from lodging financial statements with ASIC
- Reduce the tax transparency threshold for Australian owned private companies to $100 million
If you are affected by these changes, the impacts could be significant.
These amendments will become law once the Bill receives Royal
REMOVAL OF GRANDFATHERED COMPANIES EXEMPTION
If you were previously a grandfathered large proprietary company, for financial years ending on or after the date the laws receive Royal Assent, you will need to lodge audited financial statements with ASIC within four months of year-end.
Prior to these amendments, grandfathered companies would not have had an obligation to lodge with ASIC, although they should have had their financial statements prepared, audited and distributed to shareholders within that four month window.
Other Possible Exemptions
You may wish to explore other possible lodgment exemptions that may be available.
If the previously Grandfathered proprietary company is not a parent company, you may consider entering into a deed of cross guarantee with your parent. ASIC Corporations (Wholly owned Subsidiaries) Instrument 2016/785 would then permit the parent submitting consolidated financial statements to satisfy the subsidiaries lodgment obligations.
You would need to consider your specific facts and circumstances to determine whether this exemption would be available and appropriate for you.
Simplified Disclosure Framework
In addition to having to lodge accounts with ASIC for the first time, the accounts that you are required to prepare are likely to have changed.
The financial Reporting Framework has changed for years ending on or after 30 June 2022. Where previously you may have prepared either special purpose financial statements or Reduced Disclosure Regime (RDR) financial statements, it is likely for this next set of financial statements you will need to prepare them under the Simplified Disclosures Framework.
If your previous accounts have not complied with all recognition and measurement requirements of Australian Accounting Standards, transitioning to the new requirements can be complex. Further information about transitioning to Simplified Disclosures can be found in our Guide to transitioning to Simplified Disclosure Reporting.
TAX TRANSPARENCY THRESHOLD
The Australian Taxation Office (ATO) publishes tax return data each year as part of their corporate transparency regime which is made available to the public. Currently, it publishes information for:
- Australian owned private companies with total income in excess of $200 million; and
- Australian Public or foreign owned companies with total income in excess of $100 million.
- Entities that have PRRT payable
The Bill will lower the "total income" threshold for Australian private companies to $100 million (from $200 million). Total income is the amount shown at label 6S of a company's tax return.
Under this regime, the ATO discloses the following tax return information for affected entities:
- Total income
- Taxable income
- Total tax payable
- Petroleum Resources Rent Tax payable
If you are impacted by the reduced thresholds, the ATO will
generally notify you that the information listed above will be made
Voluntary tax transparency code
If you are captured by the tax transparency rules, you may wish to consider adopting the voluntary Tax Transparency Code (TTC). The TTC have been developed by the Board of Taxation and provides businesses with a set of principles and standards on disclosure of tax information. The purpose of the TTC is encourage transparency and enhancing the public's understanding of a company's compliance with tax laws.
This article is issued as general commentary - please contact us about your specific circumstances.