Additional financial reporting class orders replaced with new instruments


Legislative instruments issued by the Australian Securities and Investments Commission (ASIC), such as class orders, are automatically repealed (expire) after ten years unless ASIC takes action to preserve them. The purpose of the ten year ‘sunset’ clause is to ensure class orders are regularly updated and only remain effective while they are ‘fit for purpose, necessary and relevant’. In redrafting class orders, ASIC’s approach is to make class orders clear and user friendly.

New instruments

On 30 September 2016, ASIC reissued the following Legislative Instruments (instruments) (previously referred to as Class Orders) that impact financial reporting.

The new instruments are all effective from 29 September 2016 but have different start dates (refer discussion for each one below).

Old Class Order New Instrument
CO 98/1417 Audit relief for proprietary companies ASIC Corporations (Audit Relief) Instrument 2016/784
CO 98/1418 Wholly-owned entities ASIC Corporations (Wholly-owned Companies) Instrument 2016/785
CO 01/1256 Qualified Accountants ASIC Corporations (Qualified Accountant) Instrument 2016/786

The relief provided by the respective Legislative Instruments is essentially the same as the superseded Class Orders. These are summarised briefly below. For further specific details, please refer to the relevant documents which are hyperlinked below.

Audit relief

Legislative Instrument 2016/784 provides relief to large proprietary companies and small foreign controlled proprietary companies from having an audit, and sending accounts to members, if all of the following apply:

  • The company is not a disclosing entity, borrower in relation to a debenture (or guarantor of such a borrower) or a financial services licensee
  • No audit has been performed since 1992 (subject to certain exceptions for small foreign controlled proprietary companies)
  • Resolutions have been passed during a 19 month period (starting three months before the beginning of the financial year and ending four months after the end of the financial year) as follows:
    • Unanimous resolution by all directors that the financial report should not be audited, and
    • Unanimous resolution by all members of the company that the financial report should not be audited (made after having received a statement from the directors stating whether in their opinion, the costs of having an audit outweigh the benefits, including reasons)
  • If this is the first time that audit relief is being sought, notice of resolutions referred to above, signed by a director or company secretary, have been lodged with ASIC using Form 382
  • The company has not been given a written notice that relief is not to apply by:
    • A director any time before the directors’ declaration is signed
    • A member who controls 5% or more of votes to be cast at a general meeting, at any time up to one month before the end of the financial year
    • Any person owed approved subordinated debt by the company, at any time up to one month before the end of the financial year, or
    • ASIC
  • The directors’ declarations for all financial years include an unqualified solvency declaration
  • Company has procedures in place to assess solvency
  • Within one month of the end of each quarter, quarterly management accounts are prepared and the directors have resolved that total liabilities did not exceed 70% of total tangible assets (or consolidated amounts if applicable) and the company will be able to pay its debts when they become due and payable (Note: further resolutions are required if the company is party to a deed of cross guarantee under the wholly-owned entity Legislative Instrument 2016/785)
  • At the time the annual directors’ declaration is signed under s295(4), similar resolutions are made regarding liabilities not exceeding 70% of total tangible assets (refer point above)
  • The entity or group made a profit for the current year or the immediately preceding financial year (i.e. if you have two loss years in a row, audit relief is no longer available)
  • The ‘profits test’ and ‘liabilities test’ must be determined based on Accounting Standards, but ‘liabilities’ must include approved subordinated debt
  • No registered company auditor has indicated to the company, or any of its directors or officers, that if the financial report were audited for the financial year, it would include a modified opinion
  • The annual financial report must include a compilation report as required by APES 315 Compilation of Financial Information, issued by a ‘prescribed accountant’
  • The annual financial report must still be lodged with ASIC, even though it is unaudited (i.e. will include the compilation report referred to above), and
  • The annual report must include a statement by directors that it has not been audited in reliance on this instrument, and that the requirements of this instrument have been complied with.

If the company ceases to rely on the relief in a subsequent year (first non-reliance year), it must lodge a notice signed by a director with ASIC (Form 396) within four months of the end of the first non-reliance year.

If members or persons owed subordinated debt request a copy of the management accounts or the directors’ quarterly resolutions within seven days of the end of the quarter, the company must make these available free of charge, either at the registered office, or by sending these documents by post within 14 days after receiving the request.

While this Instrument applies from the date it is registered (29 September 2016), it applies to financial years ending on or after 1 January 2017. Despite its repeal, superseded Class Order 98/1417 continues to apply to financial years ending before 1 January 2017.

Wholly-owned companies

This instrument, 2016/785, provides relief to wholly-owned entities that are party to a deed of cross guarantee at the end of the financial year (relevant financial year) from the requirement to prepare, have audited and lodge annual financial statements with ASIC, including reporting to members.

To obtain the relief, all of the following must be satisfied:

  • The entity is not a disclosing entity, borrower in relation to debentures (or a guarantor of such a borrower) or a financial services licensee
  • The entity has a holding entity (parent), which is not a small proprietary company, with the same financial year end
  • Each member of the closed group, other than the holding entity, is a company, or a body incorporated in Australia, the United Kingdom, New Zealand, Singapore or Hong Kong
  • If a foreign entity is party to the deed of cross guarantee, the directors of the company and the holding entity are satisfied, as evidenced by resolutions of directors of the two entities, that the deed of cross guarantee is generally enforceable in the place of incorporation or formation of the foreign entity
  • No party to the deed of cross guarantee are bodies regulated by APRA
  • Consolidated financial statements and notes, including additional information for entities subject to the deed of cross guarantee, are prepared, audited and lodged with ASIC within required deadlines
  • Annual resolutions are to be made at, or near the end of, the financial year by directors to consider the advantages and disadvantages of the company remaining a party to the deed of cross guarantee
  • Complex rules exist for resolutions, particularly entities becoming, or ceasing to be, a part of the deed of cross guarantee (refer to text of the Instrument for further details).

While this Instrument applies from the date it is registered (29 September 2016), it applies to financial years ending on or after 1 January 2017. Despite its repeal, superseded Class Order 98/1418 continues to apply to financial years ending before 1 January 2017.

Qualified accountants

Legislative Instrument 2016/786 outlines ASIC’s declaration under s88B(2) of the Corporations Act 2001 of who it considers to be a ‘qualified accountant’.

Members of the following professional bodies are considered to be qualified accountants:

  • CPA Australia (CPAA)
  • Chartered Accountants Australia and New Zealand (CAANZ)
  • Institute of Public Accountants (IPA)
  • Eligible foreign professional bodies.

However, members of these professional bodies are only considered qualified accountants if they are subject to continuing professional education requirements, and confirm in writing, at or about the time of their most recent renewal of membership, that they have complied with the body’s CPE requirements.

Note that members of eligible foreign professional bodies were not referred to in superseded Class Order 01/1256. These persons must have at least three years of practical experience in accounting or auditing, and be providing a certificate under s708(8)(c) or s761G(7)(c) to a person who is resident in the same country (sophisticated investors). Eligible foreign professional bodies include:

  • American Institute of Certified Public Accountants
  • Association of Chartered Certified Accountants (United Kingdom)
  • Canadian Institute of Chartered Accountants
  • Institute of Chartered Accountants in England and Wales
  • Institute of Chartered Accountants in Ireland
  • Institute of Chartered Accountants in Scotland.

List of updated financial reporting Legislative Instruments so far

For your reference, the table below contains a list of all updated financial reporting Legislative Instruments issued so far:

Number Name
2015/840 ASIC Corporations (Exempt Proprietary Companies) Instrument
2015/841 ASIC Corporations (Non-reporting Entities) Instrument
2015/842 ASIC Corporations (Post Balance Date Reporting) Instrument
2016/181 ASIC Corporations (Electronic Lodgement of Financial Reports) Instrument
2016/187 ASIC Corporations (Uncontactable Members) Instrument
2016/188 ASIC Corporations (Directors’ Report Relief) Instrument
2016/189 ASIC Corporations (Synchronisation of Financial Years) Instrument
2016/190 ASIC Corporations (Disclosing Entities) Instrument
2016/191 ASIC Corporations (Rounding in Financial / Directors’ Reports) Instrument
2016/784 ASIC Corporations (Audit Relief) Instrument
2016/785 ASIC Corporations (Wholly-owned Companies) Instrument
2016/786 ASIC Corporations (Qualified Accountant) Instrument
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