Most founders file financial reporting under “problems for listed companies”. For years, they’re right: the ordinary small Pty Ltd prepares accounts for the ATO and its shareholders, and ASIC never sees them. But the Corporations Act 2001 (Cth) draws a line through the middle of the proprietary company world, and growth — not an IPO, not a conversion to a public company, just growth — carries you across it. On the far side sit audited financial statements, lodged with ASIC, on the public record, where competitors, journalists and counterparties can read them for the price of a search fee.
The line is section 45A, and for a venture-backed company it arrives earlier than the revenue figure suggests.
The Two-of-Three Test
A proprietary company is large for a financial year if it satisfies at least two of the following three thresholds; otherwise it’s small:
- Consolidated revenue of the company and the entities it controls is $50 million or more for the financial year;
- Consolidated gross assets of the company and the entities it controls are $25 million or more at the end of the financial year;
- The company and the entities it controls have 100 or more employees at the end of the financial year.
Three features of the test do most of the damage:
- It’s consolidated. Revenue, assets and headcount are measured across the company and every entity it controls — subsidiaries, and controlled trusts too. You can’t stay small by spreading the business across group entities; the test (like the payroll tax grouping rules) is built to see through exactly that.
- It’s accounting-standards maths. Consolidated revenue and gross assets are calculated in accordance with accounting standards in force at the time — even for a company that has never otherwise applied them. “Gross assets” means gross: no netting against liabilities, and capitalised intangibles, right-of-use lease assets and — critically — cash all count.
- Part-timers count as fractions. Headcount is taken at year end, with part-time employees counted as an appropriate fraction of a full-time equivalent. Contractors aren’t employees for this purpose — though whether your contractors really are contractors is its own problem.
The current thresholds date from the Corporations Amendment (Proprietary Company Thresholds) Regulations 2019, which doubled the previous figures ($25 million / $12.5 million / 50 employees) for financial years beginning on or after 1 July 2019.
The Trap: You Can Be “Large” While Burning Cash
Here’s the version of this that catches startups. The revenue limb feels far away at $50 million — but the asset and employee limbs don’t care about revenue, and two limbs is all it takes. A company that closes a substantial raise late in the financial year can be sitting on well over $25 million of gross assets at balance date; push headcount past 100 — not exotic for a scaling product company — and it is a large proprietary company for that year, audited accounts and all, while still deeply unprofitable. The money you raised to build the product is the same money that tips the asset limb.
The classification is also year by year. A company can be large one year and small the next (a big raise spent down, a post-layoff headcount), and the obligations follow the classification for each financial year. That cuts the other way too: you can’t reason from “we were small last year”. The test has to be rerun at every year end — which, given two of the three limbs are measured at year end, means forecasting the crossing, not discovering it.
What “Large” Actually Requires
A large proprietary company enters Chapter 2M in full. Under section 292, it must prepare an annual financial report (financial statements, notes and the directors’ declaration) and a directors’ report. Under section 301, the financial report must be audited — a review won’t do. And under section 319, the lot must be lodged with ASIC within four months of year end, where it becomes publicly searchable.
None of this is a formality. Lodgement failures are offences and attract late fees; ASIC runs periodic compliance programs against non-lodging large proprietary companies; and under section 344, directors who fail to take all reasonable steps to comply with the financial reporting provisions contravene the Act personally. And the first audit is the hard one: auditors need opening balances, revenue recognition positions and share-based payment valuations (ESOP options are an expense under the accounting standards, whatever the tax treatment) that a company which has never produced general purpose accounts may simply not have. Engage the auditor before the year you expect to cross, not four months after it.
Small Companies That Have to Report Anyway
“Small” is not a complete escape. A small proprietary company is pulled into some or all of Chapter 2M where:
- It’s foreign controlled. A small proprietary company controlled by a foreign company (for any part of the year, where it isn’t consolidated into accounts lodged with ASIC) must prepare and lodge audited financial reports — a frequent surprise after a US flip leaves the Australian operating company as the subsidiary of a Delaware Inc. ASIC relief keeps a foreign-controlled small proprietary company that isn’t part of a large Australian group on the same footing as other small companies — long housed in Instrument 2017/204 and, since September 2026, in the ASIC Corporations (Annual and Half-year Reporting) Instrument 2026/468 — but it’s conditional, not automatic.
- It raised crowd-sourced funding. A small proprietary company with CSF shareholders must prepare and lodge financial reports, and once it has raised $3 million or more (cumulatively) through CSF offers, the audit obligation lands too.
- Someone directs it. Shareholders holding at least 5% of votes can direct the company to prepare reports under section 293, and ASIC can do the same under section 294.
Relief Valves — Narrower Than They Look
The old escape hatch is gone: the lodgement exemption for “grandfathered” large proprietary companies — a 1995 settlement that kept about 1,100 of Australia’s biggest private companies off the public record — was repealed in August 2022. What remains is conditional — and was re-plumbed in September 2026, when ASIC consolidated seventeen reporting and audit relief instruments. Audit relief — formerly Instrument 2016/784, now carried forward in the ASIC Corporations (Auditing) Instrument 2026/469 — can excuse a proprietary company from audit, but only on strict conditions, including director and shareholder resolutions made within tight windows, management accounts, and financial-condition tests. Corporate groups can use the wholly-owned subsidiary relief — Instrument 2016/785, remade as Instrument 2026/533 — trading standalone reporting for a deed of cross guarantee: real liability, not paperwork.
One more reason the classification matters: the large proprietary company thresholds are becoming load-bearing elsewhere. The same two-of-three, $50 million / $25 million / 100-employee test defines Group 3 for mandatory climate reporting from July 2027 (with a lighter statement option for Group 3 entities without material climate risks or opportunities). Cross the section 45A line and you should assume other regimes are now watching the same numbers.
The playbook is short: model the three limbs into your raise planning and year-end forecasting, remember that gross assets include the round you just closed, and treat the first “large” year as a project that starts before the year does.
This article is general information only, not legal advice — whether your company is large, and what relief is realistically available, turns on group structure, control and the accounting treatment of your actual balance sheet. Viridian Lawyers advises Australian founders, startups and investors on corporate structuring, governance and compliance. If a raise or hiring plan is about to carry you over the Chapter 2M line, get in touch before year end.
