Document ID: chunk:federal_register_of_legislation:F2023C00381:reg:25:p46
Version: federal_register_of_legislation:F2023C00381
Segment Type: reg
Provision Reference: reg 25 (pt 46/47)
Character Range: 152262–155233

done correctly can have tax consequences.

     BC87           Targeted outreach was undertaken to understand the number of trusts that may be affected by this Standard, including their size (with reference to income and assets). This was to determine whether it was possible to develop objective criteria related to economic significance for distinguishing between those trusts that should be required to comply with this Standard and those that should be exempted. The Board considered whether the thresholds used for determining what constitutes a large proprietary company could be an appropriate benchmark for this purpose.

     BC88            While there are a large number of trusts undertaking business activities and therefore lodging tax returns with the ATO, data provided by the ATO indicates that a small minority of them would meet the increased income and assets thresholds used for determining what constitutes a large proprietary company.

     BC89            The Board also noted there are entities other than trusts that may currently have a requirement to prepare financial statements in accordance with AAS in their compliance documents but are not required to do so by legislation, such as partnerships, joint arrangements and self-managed superannuation funds, as well as entities subject to other requirements such as lending agreements. As these entities also have specific users, the Board decided that the issues identified above would be equally relevant to such entities.

     BC90            The Board therefore decided that existing for-profit private sector entities should be provided with an exemption from the requirement to prepare GPFS where they do not have a legislative requirement to prepare financial statements that comply with AAS. However, the Board decided this exemption should only apply where their constituting document (or another document) requiring them to comply with AAS was created or amended before 1 July 2021 (the effective date of the Standard) – ie any amendments to or creation of such documents on or after 1 July 2021 would require the entity to prepare GPFS where it referred to the preparation of financial statements that comply with AAS (see category 6) in the Summary of scope table below). If an entity were required to make any amendment to the constituting document for any reason after the effective date of this Standard, then the trustee for example could at the same time amend the financial reporting requirements, subject to the agreement of the beneficiaries. Further, the relief should not be available to an entity whose constituting document was created after the effective date of the amendments, as when drafting the constituting document, the beneficiaries should have determined their information needs including whether or not they required GPFS.

     BC91            Respondents to ED 297 expressed mixed views on such an exception. Whilst a minority considered no exemption was