All financial reports need to comply with the Corporations Act 2001 (Cth) (‘Corporations Act’), the legislation established to regulate business entities in Australia. If you are a business owner, it is important to keep your financial reports up to date. This is necessary to comply with the law and it will also allow you to evaluate how your company is performing. It further allows investors and creditors viewing the financial reports to evaluate your company’s financial performance. Large proprietary companies and some small proprietary companies need to report their financials to the Australian Securities and Investments Commission (‘ASIC’).
Entities falling into the following categories will need to lodge financial reports at ASIC:
Large proprietary companies have additional reporting requirements to that of small proprietary companies. This is determined by looking at the company’s consolidated revenue, the value of gross assets and the number of employees. A proprietary company is considered large when it meets two of the following requirements:
Large proprietary companies will need to prepare a financial report and a directors’ report for the financial year which must be audited (ie obtain an auditor’s report). Once this has been finalised, the report will need to be shown to its members within four (4) months after the end of the financial year and then lodged at ASIC.
A proprietary company is considered small when it meets all of the following requirements:
Small proprietary companies generally do not have to lodge annual financial reports and a directors’ report with ASIC and do not need to be audited unless:
Any direction given (either by shareholders or by ASIC) must be made in writing within the period concerned and must be made no later than 6 years after the end of the period.
A dormant company is one that has not traded or has made no significant accounting transactions in the last financial year. If the company has been dormant, financial reports still have to be lodged to disclose their ‘nil’ assets to ASIC.
Owners of a dormant company may wish to retain their company in case they decide to recommence trading in the future. However, in most cases it would be cheaper to wind down and deregister the company due to the costs associated with retaining the company (such as an accountant or ASIC filing fees).
Reports are based on data from transactions occurring in the last financial year. A disclosing entity or a registered scheme will need to lodge their financial reports to ASIC within three (3) months after the end of the financial year and pay an annual review fee to ASIC. A financial year begins on 1 July and ends on 30 June meaning financial reports for a disclosing entity need to be lodged by 30 September to avoid a late penalty fee imposed by ASIC.
Large proprietary companies and some small proprietary companies must lodge their financial reports within four (4) months after the end of the financial year (ie by October 31st).
You should lodge your financial reports using Form 388 accessible from the ASIC website via this direct link: www.asic.gov.au/regulatory-resources/forms/forms -folder/388-copy-of-financial-statements-and-reports
By law, all companies are required to keep track of their accounting and financial transactions. This is regardless of whether your company needs to lodge financial reports at the ASIC. A company is obliged to keep financial records that enable true and fair reporting of financial statements. This means that a company will need to keep, in chronological order, proof of the accounting transactions such as sales, invoices and receipts.
If the company is preparing financial reports, the working papers and other documents needed to explain the financial statement figures are needed as well. The financial reports may be kept in any language, however an English translation must be made available within a reasonable time to a person who is entitled to inspect the records and who asks to see an English translation.
These financial records must be kept for seven (7) years (after the end of each financial year) as required by law. If financial records are kept in electronic form, they must be able to be converted into hard copy. A hard copy must be made available within a reasonable time to a person who is entitled to inspect the records.
Comasters is able to assist clients to understand their legal obligations with financial reporting and making sure all reports and statements comply with the law.
© Comasters September 2015.
Important: This is not advice. Clients should not act solely on the basis of the material contained in this paper. Our formal advice should be sought before acting on any aspect of the above information.