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Submission to the ANAO – ASIC’s Interpretation of “Supervising Audits of Companies”

Posted on: June 10th, 2025


9 May 2025

I write to draw the ANAO’s attention to concerns regarding ASIC’s application of the term “supervising audits of companies” under Regulation 9.2.01(a)(ii) of the Corporations Regulations 2001 and section 1280 of the Corporations Act 2001. In practice, ASIC appears to interpret “supervision” narrowly to mean direct supervision of audit staff, excluding sole practitioners or small-firm auditors who oversee audits without employees. This interpretation is inconsistent with legislative intent and legal precedent.

The Administrative Appeals Tribunal has confirmed that “supervision” is broader than signing audit opinions or directly managing junior audit staff. In Nicholas Guy Birdseye v Australian Securities and Investments Commission, the Tribunal held that supervising audits includes responsibilities such as:
• Planning the audit
• Managing the engagement
• Reviewing audit findings
• Overseeing audit documentation and risk assessments
(Refer: [1126]–[1129] of the decision)

Importantly, this supervisory role encompasses the strategic and technical oversight required to form audit opinions, irrespective of whether subordinate staff are present.
In Re Higham (1987) 5 ACLC 352, the Queensland Supreme Court clarified that audit supervision extends beyond intensive fieldwork and includes:
• Ongoing review of audit strategy
• Liaison with the client
• Periodic review of the entity’s activities
• Resolution of audit-related issues (e.g. accounting treatment in financial statements)
• Preparation of final review notes

This case also recognised that a person may still satisfy the supervision requirement if only 10% of their time is spent on direct audit tasks, provided they exercise continuous oversight and hold overall responsibility for the audit.

Regulation 9.2.01(a)(ii) requires at least 750 hours supervising audits of companies in the 5 years prior to application. This is in addition to the 3000 hours of audit experience under a Registered Company Auditor (RCA) required under reg 9.2.01(a)(i). The term “supervising” must be interpreted in light of the broader auditing responsibilities described in legislation and case law.

Finally, audits of entities with company-like attributes (e.g. large incorporated associations or charities with ASIC-style reporting obligations) have been recognised as substantively equivalent for supervision purposes.

Therefore, ASIC’s refusal to recognise audit supervision conducted by sole practitioners or non-employer auditors is inconsistent with legislative standards and judicial interpretation. I respectfully submit that the ANAO recommend that ASIC align its assessment framework with the definitions established in Birdseye, Re Higham, and the Corporations Regulations, and recognise the full scope of audit supervision, including planning, engagement oversight, and technical review—even in the absence of subordinate staff.

Treasury’s ANAO Finally Investigating ASIC’s RCA Licensing – A Small Firm’s Fight for Fairness

Posted on: April 16th, 2025

After more than two years of battling red tape, industry silence, and outdated licensing processes, the movement to reform ASIC’s Registered Company Auditor (RCA) registration system is finally gaining traction. Treasury, via the Australian National Audit Office (ANAO), has now launched a performance audit into ASIC’s regulation of company auditors — and I couldn’t be more relieved.

This has been a long road.

I began my RCA registration journey nearly two and a half years ago. For the past 12 months, I’ve actively been campaigning to expose the significant barriers faced by small firms trying to enter the audit profession in Australia. My campaign has included hundreds of hours of unpaid advocacy, writing to just about every institution that might listen.

A Letter-Writing Marathon

Since 2023, I’ve sent over 1,000 letters and emails — not a typo — to the following:

ASIC Chair and executive staff

Treasury representatives

Federal and state politicians

The Prime Minister’s Office

Industry regulators including the AASB and FRC

Professional bodies such as CPA Australia, CA ANZ, and IPA

Media outlets like the AFR, Accountants Daily, and Inside Small Business

Think tanks, environment groups, and public policy forums

And that’s just the short list.

Despite this mountain of effort, my applications to become an RCA have repeatedly hit roadblocks. The core issue? An outdated and anti-competitive licensing regime that seems to favor large audit firms and overseas-trained auditors — while making it near impossible for competent small-practice professionals to qualify.

Discrimination by Design?

The system is stacked. ASIC’s registration requirements are structured in such a way that they actively discriminate against sole practitioners and small firms. They rely heavily on traditional, hierarchical firm structures and ignore collaborative, project-based training models that are common in smaller practices. This is not only unfair — it’s economically short-sighted.

Treasury and ASIC appear to accept audit formats provided by large international firms while rejecting perfectly capable Australian applicants with years of practical experience. It’s a system that values form over substance.

Meanwhile, I’ve assisted with articles explaining why the one-on-one training in small firms often results in more robust and rounded auditors compared to conveyor-belt graduates in big firms. Unfortunately, those in charge of licensing have been slow — if not outright unwilling — to engage with these ideas.


ANAO Steps In – At Last

After multiple submissions to the ANAO in late 2024 — and after my articles were published in Accounting Times and Inside Small Business — the ANAO has finally opened its doors to these concerns. Their current review of ASIC’s RCA registration regime is a direct result of industry pressure and grassroots advocacy.

Encouragingly, once I named certain industry bodies in my submissions, some of them began to take the issue more seriously. CPA Australia and CA ANZ, among others, have now lodged submissions of their own to the ANAO — a sign that the tide may finally be turning.

A Ripple Becoming a Wave

In recent months, I’ve been heartened to see more accounting publications and professionals speaking out. The audit industry’s decline — especially among domestic RCAs — is no longer something we can ignore. With new sustainability and environmental reporting standards on the horizon, the need for a strong, sustainable pipeline of local auditors is more critical than ever.

Yet without reform, we risk creating an even greater reliance on imported labour and large firms, which will further sideline small Australian practices.
Where to From Here?

This fight isn’t over. If you’re a small practitioner, an aspiring RCA, or someone who simply believes in fair and open access to the profession, now is the time to speak up.

Make your submission to the ANAO. Contact your professional body. Share your story. The more voices behind this, the stronger our case for lasting change.

Thank you for the support from Accountants Daily.

https://www.accountantsdaily.com.au/regulation/20858-small-firm-accountants-face-major-barriers-to-auditor-registration

 

Is my client performing R&D?

Posted on: February 15th, 2024

Identifying Research and Development (R&D) opportunities within your clients’ businesses involves a strategic approach that includes understanding your clients’ industries, their business operations, and their growth objectives.

1. Understand Industry Trends and Innovations:

Stay updated on the latest trends, technologies, and innovations within the industries of your clients. For instance, if a client is in the manufacturing sector, advancements in automation or sustainable materials may present R&D opportunities.

2. Analyse Business Operations and Products/Services:

Look for areas where improvements can be made, whether it’s in product development, cost reduction, efficiency enhancement, or entering new markets. These areas could benefit from R&D initiatives.

3. Engage in Strategic Conversations:

Have regular, strategic conversations with your clients about their business goals, challenges, and areas where they seek improvement or growth. Listening carefully can uncover potential opportunities for R&D that align with their objectives.

4. Review Financial Performance:

Analyse your clients’ financial statements to identify areas where R&D could improve profitability or reduce costs. High costs in certain areas may indicate inefficiencies that R&D could address.

5. Assess the Competitive Landscape:

Help your clients assess their position relative to competitors and identify areas where R&D could provide a competitive advantage. This might involve developing new products, enhancing existing offerings, or adopting new technologies to outpace competitors.

6. Identify Funding Opportunities:

Be knowledgeable about government grants, tax incentives, and other funding opportunities available for R&D activities.

7. Promote Collaboration and Partnerships:

Encourage clients to explore partnerships with universities, research institutions, or other companies for R&D projects. These collaborations can provide access to expertise, technologies, and additional resources.

8. Leverage Data and Analytics:

Use data analytics to identify trends, customer needs, and market gaps that R&D can address. Data-driven insights can provide a strong foundation for justifying R&D investments.

By employing these strategies, you can play a crucial role in identifying and fostering R&D opportunities within your clients’ businesses, helping them to innovate, grow, and stay competitive.

R&D Mid Year Review

Posted on: December 28th, 2023

Hey there, innovative minds! 🚀

As we hit the halfway mark of the year, it’s the perfect time for businesses to pause and reflect on their Research & Development (R&D) journey. Here’s why a mid-year review of your R&D activities is not just good practice, but essential for staying ahead in the game:

🎯 Align with Goals: Ensure your R&D efforts are in sync with your business objectives. Are we on the right path to innovation? Let’s make sure!

💰 Budget Smart: Keep a close eye on your R&D spending. Are we optimizing our resources? This check-in can save you from budgetary surprises down the line.

📈 Track Performance: Assess the progress of your R&D projects. Celebrate the milestones, learn from the setbacks, and keep steering towards success.

🛡️ Risk Management: Identify and mitigate risks early. Stay proactive and be prepared for the unexpected turns in the R&D journey.

🔍 Adapt and Innovate: The world is constantly changing, and so should our R&D strategies. Adaptability is key to staying relevant and competitive.

🤝 Team Spirit: Engage your team in these reviews. Their insights are invaluable, and this collaboration can boost morale and drive towards common goals.

Remember, R&D is the heartbeat of innovation and progress. A mid-year review is not just a checkpoint; it’s a launchpad for the next phase of your groundbreaking work.

Let’s innovate, evaluate, and accelerate! 🌈✨

www.business.gov.au/grants-and-programs/research-and-development-tax-incentive/how-we-check-compliance.

#InnovationLeaders #RDStrategy #MidYearReview #BusinessGrowth #StayAhead #TeamworkMakesTheDreamWork

The benefits of a foreign business registering a local company in Australia

Posted on: August 12th, 2023

A USA client asked what are the benefit of a USA company registering a local Australian company.

Registering a local company in Australia can offer several benefits for foreign businesses looking to establish a presence in the country. Here are five advantages:

  1. Market Access and Credibility: Registering a local company demonstrates a commitment to the Australian market, which can enhance your credibility and reputation among local customers, partners, and investors. It also allows you to tap into the Australian market’s potential, giving you better access to customers and clients.
  2. Legal and Regulatory Compliance: Operating as a local company ensures that you comply with Australian business laws and regulations. This can help you avoid legal issues, penalties, and complications that might arise from operating as a foreign entity in the country. Registering a local company ensures that you follow all necessary protocols and meet local requirements.
  3. Tax Benefits and Incentives: Registering a local company can offer various tax benefits and incentives that might not be available to foreign entities. Australia has a competitive tax regime with several tax deductions and credits available to local companies. Additionally, you can take advantage of the country’s network of double taxation agreements to potentially reduce the tax burden on international transactions.
  4. Access to Government Support: Many governments provide support and incentives to local businesses, and Australia is no exception. By registering a local company, you can access various government programs, grants, and initiatives aimed at promoting business growth, innovation, and investment.
  5. Ease of Doing Business: Operating as a local company can streamline business operations by eliminating certain bureaucratic hurdles associated with being a foreign entity. Local companies often have smoother interactions with local banks, suppliers, and customers, making it easier to conduct day-to-day business activities.

It’s important to note that while there are numerous benefits to registering a local company, it also comes with responsibilities and costs. Setting up a local entity involves legal procedures, ongoing compliance requirements, and administrative tasks. Before making a decision, it’s advisable to consult with legal and financial experts who can provide tailored advice based on your specific business goals and circumstances.

ATO STIMULUS

Posted on: March 25th, 2020

Hi All,

There has finally been some clarity put forward by the ATO so I have included a few points below. When we lodge your quarterly BAS for March 2020, June 2020 and September 2020 we can review everything in more detail.

The ATO will provide tax-free cash flow boosts of between $20,000 and $100,000 to eligible businesses, delivered through credits in the activity statement system, when eligible businesses lodge their activity statements. If you are eligible, you do not need to separately apply and upon lodgement of your activity statement, your first amount will automatically be credited to your account but no earlier than 28 April 2020.

Eligible entities who received initial cash flow boosts will receive additional cash flow boosts, for the periods June to September 2020, equal to the total amount of initial cash flow boosts received. This will be delivered in either two or four instalments depending on your reporting period.

Eligible businesses must have held an ABN on 12 March 2020 and lodge your activity statement to receive the credit.

Eligible payments include: salary and wages, director fees, voluntary withholding from payments to contractors etc.

In addition, you must also have either:

  • Derived business income in the 2018–19 income year and lodged your 2019 tax return on or before 12 March 2020.
  • Made GST taxable, GST-free or input-taxed sales in a previous tax period (since 1 July 2018) and lodged the relevant activity statement on or before 12 March 2020.
  • However, you may still be eligible where you don’t have any income tax assessment for prior year.

Initial cash flow boost

Eligible businesses that withhold tax on their employees’ salary and wages will receive a credit equal to 100% of the amount withheld, up to a maximum of $50,000. The minimum credit will be $10,000, even if the amount required to be withheld is zero. However you will not be eligible to receive any more cash flow boosts until your PAYG withholding exceeds $10,000 over the relevant periods.

Monthly lodgers will receive a credit that is calculated at three times the rate (300 per cent) in the March 2020 activity statement, to align with quarterly lodgers.

The total of all initial cash flow boosts across all of the relevant periods cannot exceed the maximum limit of $50,000. This is a little vague but it looks like the ATO will do a second payment up to $50,000 which will then equal the total of $100,000 overall (as above).

Examples

  1. If you pay a salary of $1,000 for the March 2020 Quarter with $0 withholding on the BAS. The ATO will still provide a credit to you on $10,000 as the minimum payment.
  2. If you pay a salary of $160,000 for the March 2020 Quarter with $50,000 withholding on the BAS. The ATO will provide a credit to you on $50,000 as the maximum payment. There would be no additional tax payable when you lodge your personal tax return with a salary of $160,000 as the company would have withheld the $50,000 PAYG. You can therefore take money out of the company tax free.

Other Considerations

  • Superannuation would still be payable on all salaries made.
  • Business still need to report the salaries through STP.
  • Paying a salary can be more tax effective then paying a dividend (to get the credit).
  • If the salary generate a tax loss, that loss would carry forward to FY2020 which would also be beneficial for the 2020 tax returns.

There is further information here:  https://www.ato.gov.au/Business/Business-activity-statements-(BAS)/In-detail/Boosting-cash-flow-for-employers/

In the meantime please let me know if you have any questions.

Research and Development (R&D).

Posted on: March 10th, 2020

Who is R&D For?

Many company developing novel products or services will spend hundreds of thousands of dollars, without realising they might be able to get government assistance in the form of an R&D subsidiary through AusIndustry and the ATO.

Who is Eligible?

If you have a company and you are researching and developing a novel product or service, that is you are creating new knowledge, then you should consider applying for the R&D Tax Incentive.

Applicants need to self-assess their eligibility for the R&D Tax Incentive. As a self-assessment program, companies assess for themselves whether their activities satisfy the definition.

What Can You Get?

If you are eligible, you can get a 45% refundable tax offset for eligible companies with an aggregated turnover of less than $20 million per annum.

What Activities are Eligible?

Activities are eligible if they meet the definition of R&D activities. This includes activities whose outcome cannot be known or determined in advance on the basis of current knowledge, information or experience, but can only be determined by applying a systematic progression of work that: a) is based on principles of established science; and b) proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions.

Could the Outcomes Have Been Known in Advance?

The definition requires that the outcome of the experiments could not have been known or determined in advance on the basis of current knowledge, information or experience. This requirement will not be satisfied if: a) experiments merely confirm what is already known; or b) the outcome of the experiments could be deduced or determined by a competent professional in the field on the basis of current knowledge, information or experience.

Please also see:

https://www.industry.gov.au/data-and-publications/ausindustry-rd-tax-form-0

Cryptocurrency Business & Tax

Posted on: February 13th, 2020

Brief Background

Following its establishment in 2013, the Cryptocurrency Exchanges industry has become one of the fastest growing industry in Australia because it caters to rising interest in cryptocurrencies as a form of payment. These opportunities are expected to contribute to growth in enterprise and employee numbers over the next five years.

Cryptocurrency Business

I have worked with Cryptocurrency businesses since they first emerged. While most businesses tend to operate at a loss for the first few years, the ATO allows small businesses operators to offset their businesses losses against their other salary income. This is very advantageous as it enables you to get a tax refund during the early Start-Up state of your business.

There are a few conditions that need to be assessed. For instance if your salary is less than $250,000 and your Cryptocurrency business income is more than $20,000 then any net business loss can be tax deductible resulting in an income tax refund.

Determining if you operating a Cryptocurrency Business can depend on a number of factors. The main one to consider are:

  1. Are you operating for the purpose of making a profit?
  2. Do you have significant and regular transactions?
  3. Are you keeping proper records?
  4. How much capital has been invested?

Cryptocurrency Investor

If you are buying Cryptocurrency with the intention of holding them long-term, then you would usually be an investor and not a business operator. This means than the net proceeds you make from the sale of the Cryptocurrency is treated as a net capital gain instead of ordinary business income.  

A significant difference is that a net capital loss from investing cannot be used to offset other salary income. These net capital losses must be carried forward and offset against future capital gains only.

What To Do?

Make contact with me because I can help you!

Business Start-Up

Posted on: February 9th, 2020

Do you have a business idea?

The hardest, but more rewarding part of any business is thinking of your idea to pursue. Luckily, the internet and working from home has enabled many people to start a new business that offers an improvement on a current idea. This can include improvements such as offering a cheaper cost alternative or offering a more customer focused approach.

Think about the current offerings and focus on how you can create something better, cheaper or faster.

What do you need to get started?

If you’re starting a new business is very important to keep your costs low. In some instances it can take a few years before the business generates enough income to pay for itself and to provide you with a wage. Therefore I recommend having enough savings so that you can support yourself for a year if needed.

Having a separate part time job can be a great source of supplement income and also provide a necessary distraction from the loneliness that can accompany being self-employed. I also found a part time job can lead you to more customers and be a great source of marketing material (if the secondary job is in a complementary field).

You also need to address any licensing or regulatory requirements for your industry. For example, do you need a degree or additional licensing or industry memberships?

Get some independent feedback.

It’s good to get started so that people can interact with your product or service and see what they think of it. A fresh set of eyes can help point out a problem you might have missed. Plus, these people can become your first customers, especially if you listen to their feedback and adapt your offering accordingly.

You need to be open to both positive and negative feedback and be able to incorporate it back into your business effectively.

Register your business

You need to ensure you select the correct business structure from the onset. If you are starting a small business it can be good to simply register an Australian Business Number (ABN) in your personal name because this is a cheaper and easier approach during start-up.  

Once your business has signs of growth then you should consider registering a private company (Pty Ltd) or setting up a family trust. This is a more expensive option but it will provide considerable income tax advantages and provide the necessary asset protection. For example, if you own your own home then a company structure can help protect that home in the event that anything goes wrong with your business.

You should also consider registering a business name, trademark and website.

Grow your business.

Whether your buy an existing business or start a small business you will need to expand the sales base and make it more profitable.  

As an accountant I have found that working with people in key industries can be great. For example, I found and made friends with a business bankers, a good financial planner, and commercial lawyers as we can refer each other customers. Building personal relationships alongside business relationship meant that people will always think of you and be happy to refer you customers.

Using social media effectively through organic, influencer or paid campaigns can also help build your business and retain customers. You need to provide useful information in a format that people will want to read.

Direct Selling / MLM and ABN Requirements

Posted on: December 2nd, 2016

abn

The Australian Taxation Office (ATO) is reviewing several Australian Business Number (ABN) registrations of Independent Salespeople within the direct selling /MLM industry. The ATO is becoming increasingly concerned that many people who believe they are conducting a commercial enterprise are in fact only engaging in a hobby or part time recreational activity.

The Australian business landscape is complicated and it is not enough to simply register for an ABN and then rely on that ABN as proof of your commercial enterprise. The ATO’s view is that a business consists of many characteristics including: repeated transactions, a thought-out business plan, a separate office space and an intention to generate a profit, etc.

Our firm sees difficulties for both the Direct Selling / MLM firms and their Independent Salespeople where no ABN is provided by the Independent Salesperson. Particularly as the ATO requires that 49% of the commissions be withheld from the Independent Salesperson and reported and paid by the Direct Selling / MLM firm to the ATO.

However, our firm has been successful in getting exemptions from the requirement to withholding 49% of the commissions where no ABN is provided, up to $10,000 a year in commission. This has proved very helpful for our clients and their sales teams.