In its second move this week to improve conditions for small and medium businesses, the Morrison government has today announced a plan to double the ASIC reporting threshold for many proprietary companies.
Treasurer Josh Frydenberg said the reforms will deliver $300 million in savings to SMEs over the next four years, saving about 2200 businesses from having to lodge financial, directors and auditors reports with the corporate regulator.
Currently, companies that meet two out of three requirements — including annual revenue of $25 million or more, $12.5 million or more worth of assets, and 50 or more employees — are required to lodge reports with ASIC each year.
Those requirements will be doubled under the reforms, which is estimated to reduce compliance costs by $81.3 million annually.
The government estimates the cost of preparing a financial report at approximately $36,950 per company, each year.
“We’re reducing the financial reporting burden for 1000s of #smallbiz, so they can get on with creating jobs rather than creating paperwork,” Frydenberg tweeted.
The red tape reductions are one of several SME-related policy changes the government is championing in the lead up to the election next year.
Last month it spent $3.2 billion bringing forward corporate tax cuts for companies with under $50 million in annual revenue and earlier this week it committed $2 billion to improve access to finance for SMEs.
Council of Small Businesses of Australia (COSBOA) chief executive Peter Strong welcomed the red tape reductions, saying the recent string of SME policy announcements is a win for common sense.
“I’ve spoken to people who run these companies and they employ quite a few people, they don’t get why they have to do this [reporting],” Strong tells SmartCompany.
“What we’re seeing from the government is [they’re] dealing with what’s getting in the way of competition and productivity.”
In a statement, Labor’s financial services spokesperson Clare O’Neil said her party will “carefully consider the proposal”.
“Red tape reductions always need to be considered against appropriate transparency and oversight,” she said.
Under the changes, the reporting threshold for what’s considered to be a “large proprietary company” will be two out of three increased requirements: $50 million in consolidated revenue, $25 million in gross assets or 100 or more employees.
While increasing the reporting threshold will reduce red tape, it will cut back on corporate transparency, raising concerns it will be more difficult for ASIC to police dodgy operators.
Tony Greco, general manager of technical policy and public affairs for the Institute of Public Accountants, describes the changes as a “double-edged sword”.
“From a transparency point of view, it’s a loss,” he tells SmartCompany.
Greco doesn’t believe the changes will necessarily prevent ASIC from doing its job though, namely because businesses still need to prepare records and ASIC can request details.
He says much of the information ASIC currently requests companies to provide is also required by other stakeholders, which means most businesses will have to compile the information anyway.
“A lot of those entities are already having to report, so it’s not going to be a complete cost saving … if you’re a supplier or a financier you’re going to ask for that information anyway.”
Greco, a member of the government’s Black Economy Taskforce, doesn’t think the reforms will hamper efforts to crack down on dodgy operators more broadly, saying the affected businesses are already large enough to be in the system.
However, if the government or ASIC is concerned about a particular cohort of businesses, the policy could easily be changed to cut out certain industries, Greco explains.
This story was updated at 1:31 PM AEDT, November 16 to add comment from the Labor Party.