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SMEs are expected to save more than $300 million over the next four years under government plans to raise financial reporting thresholds.
Federal Treasurer Josh Frydenberg and Small Business Minister Michaelia Cash announced on Friday (16 November) that the government plans to double the threshold for proprietary businesses to be considered large enough to have to comply with financial reporting obligations.
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Currently, proprietary businesses are considered “large” if they meet at least two of three thresholds for any given financial year: a minimum of $25 million in consolidated revenue, a minimum of $12.5 million in consolidated gross assets and at least 50 employees.
Under the new proposal, these thresholds will be lifted to a minimum of $50 million in consolidated revenue, a minimum of $25 million in consolidated gross assets and at least 100 employees.
The changes will exempt one-third of business (2,200 out of approximately 6,600) from their financial reporting and audit requirements with the Australian Securities and Investments Commission (ASIC).
These businesses will save an estimated $81.3 million per year as a result, as it costs an average of $36,950 per business per year to prepare and audit financial reports, according to the government.
Small businesses will still be legally required to keep written financial records, and they may need to prepare or audit financial reports if directed by either ASIC or 5 per cent or more of their shareholders.
Earlier in the week, the federal government announced its commitment to establish a new $2 billion taxpayer-backed Australian Business Securitisation Fund (ABSF) to “significantly enhance” the ability for small businesses to borrow funds by providing “significant additional funding to smaller banks and non-bank lenders to on-lend to small businesses on more competitive terms”.
As the ABSF is underpinned by public bonds, the government will bear some of the risk of lending to small businesses. It is expected that participating lenders will apply normal standards to loan applications.
The Morrison government’s plan to accelerate tax cuts for SMEs by five years had also passed Parliament in October, meaning that the tax rate will go down to 25 per cent from 2021–22 for businesses with an annual turnover below $50 million.
Legislation designed to extend the $20,000 instant asset write-off for a further 12 months to June 2019 for small businesses had passed the Senate a month earlier in September.
