Most Australian private companies will never need an audit, and many owners assume that means none ever will. Then the business has a strong run, crosses a line it did not know existed, and discovers it owes ASIC audited financial statements, prepared to accounting standards, lodged on a public register, with real penalties for getting it wrong. ASIC has made non-lodgement an enforcement priority: in 2025 it issued infringement notices of at least $187,800 each to a group of large proprietary companies that failed to lodge on time, totalling over $2.2 million.
This guide explains exactly where the lines sit, who else gets caught beyond the size test, and what to do in the year you approach the thresholds.
Published: June 2026
A statutory audit is an independent examination of a company's financial report by a registered company auditor, resulting in an opinion on whether the report complies with accounting standards and gives a true and fair view. For companies caught by the Corporations Act requirements, the audited financial report, directors' report, and auditor's report must be prepared annually and lodged with ASIC, where they become publicly accessible.
This is distinct from an ATO review, a due diligence exercise, or the voluntary audits sometimes requested by banks or franchisors. The trigger here is the Corporations Act, and it turns primarily on size.
A proprietary company is large for a financial year if it meets at least two of the following three criteria, measured for the company together with any entities it controls:
Meet two of three, and the company must prepare and lodge an audited financial report and directors' report with ASIC for that year. Meet one or none, and the company is small, with generally no audit or lodgement obligation (subject to the exceptions below).
Three features of the test catch people out. It is consolidated: a group of entities none of which is individually large can be large together, because the controlled entities' revenue, assets, and headcount aggregate. The thresholds use gross assets, not net, so a property-heavy or debt-funded balance sheet reaches $25 million faster than owners expect. And the employee test counts heads at year end, where part-timers are counted appropriately, so labour-intensive businesses can trip the test at revenue levels well below $50 million.
Size is the main gate, but not the only one.
Foreign-controlled small companies. A small proprietary company controlled by a foreign company generally has financial reporting obligations even below the size thresholds, unless relief applies (for example, where its results are consolidated into financial statements lodged with ASIC by a registered foreign parent, or specific ASIC relief instruments are satisfied). Australian subsidiaries of overseas groups should confirm their position with their accountant rather than assume the small-company exemption covers them.
Formerly grandfathered companies. For decades a class of older family-owned large proprietary companies was exempt from lodging financial reports with ASIC. That exemption ended: for financial years ending on or after 10 August 2022, grandfathered large proprietary companies must lodge like any other. Long-established private groups relying on the old exemption are now squarely in scope, and several have already attracted ASIC attention for first-time lodgement errors.
Shareholder or ASIC direction. Even a genuinely small proprietary company can be required to prepare (and potentially audit) financial reports if shareholders holding at least 5% of votes direct it, or if ASIC directs it.
Other categories. Public companies, including companies limited by guarantee above modest revenue tiers, AFSL holders, and various regulated entities carry their own audit and reporting regimes outside the scope of this guide. Charities registered with the ACNC follow ACNC review and audit tiers instead.
Becoming large is a step change in compliance, and the audit fee is only part of it.
The audit itself. First-year audits for businesses at the threshold commonly run from the tens of thousands of dollars, scaling with group complexity, inventory, and the state of the underlying records. Messy books multiply audit hours directly.
Audit-ready accounting. The bigger hidden cost is upgrading the finance function to produce general purpose financial statements under accounting standards: proper revenue recognition, lease accounting, consolidations with intercompany eliminations, substantiated balance sheets, and documented judgements. A business that has run on cash-basis thinking and an unreconciled balance sheet faces a genuine remediation project. The disciplines involved, a substantive month-end close with every balance sheet account reconciled, and clean intercompany accounts across the group, are the same ones covered across our resources, and they are dramatically cheaper to build before an auditor is in the room than during.
Public disclosure. Lodged financial reports are accessible to anyone, including competitors, customers, and suppliers. For many private groups this is the change that stings most.
Deadlines and enforcement. Reports must be lodged within the statutory window after year end (four months for proprietary companies), and ASIC's recent infringement notice program shows it is checking, including proactively querying companies that appear to meet the thresholds.
If forecasts put the group near two of the three criteria, act in advance rather than after year end. Confirm the consolidated position with your accountant early, since control, and therefore consolidation, follows accounting definitions rather than shareholding percentages alone, and structure questions are advisor territory. Get the balance sheet to audit standard a year early: reconcile everything monthly, document intercompany flows, and formalise the intercompany loan and recharge arrangements an auditor will test. Select an auditor before year end, because independence rules constrain how much the audit firm can fix for you, and good firms book out. And budget for the recurring cost, not just year one.
A business at this scale also typically needs the reporting infrastructure of a real finance function: monthly management accounts, group consolidation, and senior review. That can be built internally or through an embedded finance team with CA oversight; the cost comparison by business size is laid out in how much it costs to run a finance team in Australia, and our hire vs outsource calculator puts numbers on the two paths. Note the boundary: audit-ready bookkeeping, reconciliations, and management reporting are finance-function work; the audit itself must be performed by an independent registered company auditor, and tax structuring around the thresholds belongs with your tax advisor.
A hypothetical labour-hire and facilities group runs three companies under a holding company: combined revenue $43 million, gross assets $11 million, and 140 employees at 30 June. Revenue is under $50 million and assets are under $25 million, but the employee test is met, so the group sits at one of three criteria: small, no audit required.
The following year, revenue grows to $52 million with 155 employees. Now two of three criteria are met, and the holding company is a large proprietary company for that year: audited consolidated financial statements, a directors' report, and lodgement with ASIC within four months of year end. The time to have discovered this was at budget time, when the forecast crossed $50 million, not in August when the accountant mentions it. Companies that meet the definition and fail to lodge are exactly the population ASIC's infringement notice program targets.
Do small companies in Australia need an audit?
Generally no. Small proprietary companies have no audit or ASIC lodgement requirement unless directed by ASIC or by shareholders holding at least 5% of votes, or unless they are foreign-controlled without applicable relief.
What makes a company a large proprietary company?
Meeting at least two of three criteria, measured with controlled entities on a consolidated basis: $50 million or more in revenue for the year, $25 million or more in gross assets at year end, or 100 or more employees at year end.
Are the thresholds tested per company or across the group?
Across the company and the entities it controls, consolidated. Several individually small entities can constitute a large group, which is one of the most common ways businesses cross the line without noticing.
Is the asset test net or gross?
Gross. Consolidated gross assets of $25 million or more counts, regardless of how much debt sits against them.
What does a large proprietary company have to lodge?
An audited financial report prepared under accounting standards, a directors' report, and the auditor's report, lodged with ASIC annually within four months of year end, where they become publicly available.
What happens if a large proprietary company does not lodge?
ASIC enforcement, including infringement notices that in 2025 ran to at least $187,800 per company, alongside the obligation to lodge the outstanding reports. ASIC has been proactively contacting companies that appear to meet the thresholds.
Do foreign-owned Australian subsidiaries need audited accounts?
Often yes, even when small, because small proprietary companies controlled by foreign companies carry reporting obligations unless specific relief applies. The position depends on the group's circumstances and should be confirmed with the company's accountant.
What ended for grandfathered companies?
The long-standing exemption that let certain older large proprietary companies avoid lodging financial reports with ASIC. For financial years ending on or after 10 August 2022, those companies must prepare, audit, and lodge like any other large proprietary company.
Can my bookkeeper or BAS agent do the audit?
No. A statutory audit must be conducted by a registered company auditor independent of the company. A finance team's role is to make the company audit-ready: reconciled accounts, documented intercompany positions, and financial statements the auditor can test efficiently.
About Scale Suite
Scale Suite is a Sydney-based provider of outsourced finance teams and fractional CFO services for Australian SMEs. We deliver weekly bookkeeping, payroll, BAS/IAS lodgement, cashflow reporting, management accounts, and strategic fractional CFO oversight, all as a fully embedded team that works inside your business.CA-qualified, Xero Certified, and registered BAS Agents, we replace fragmented bookkeepers and once-a-year accountants with one responsive finance function at a fraction of the cost of full-time hires. We serve growing businesses across Sydney, Melbourne, Brisbane, and Perth, with packages starting from $1,500 per month and no lock-in contracts.
We review and check this guide periodically. At the time of writing (June 2026), all information was current. Scale Suite is a registered BAS Agent, not a licensed tax advisor or financial advisor. This content is general information only and does not constitute professional tax, financial, or legal advice. Some details may change over time.
Scale Suite is a Sydney-based provider of outsourced finance and HR services for Australian SMEs. We deliver bookkeeping, financial reporting, payroll processing, fractional CFO support, recruitment, employee onboarding, people and culture support, and fractional HR oversight, all as a fully embedded team that works inside your business.
Employment Hero Gold Partner, CA-qualified, and Xero Certified, we replace fragmented finance and HR processes with one responsive, senior-level function at a fraction of the cost of full-time hires. We serve growing businesses across Sydney, Melbourne, Brisbane, and Perth, with packages starting from $1,500 per month and no lock-in contracts.
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