# Audit Exemption Thresholds in Malaysia: the 2025–2027 Phase-In > The exact revenue, asset and employee thresholds for audit exemption under SSM Practice Directive 10/2024, phase by phase, with the two-of-three rule and the three-year lookback applied. - Category: audit - Language: en - Status: published - Updated: 2026-07-20 - Canonical: https://negaraku.md/en/audit/audit-exemption-thresholds --- If you take one number away from this page, take this one: the RM3 million threshold everyone quotes does **not** apply until financial periods commencing on or after 1 January 2027. Practice Directive 10/2024, issued by SSM on 16 December 2024 under subsection 267(2) of the Companies Act 2016, phases the audit exemption thresholds in over three years. A large share of the Malaysian pages ranking for this query state RM3 million and 30 employees as though current, and several also state that all three criteria must be met. Both are wrong, and they fail in opposite directions — one lets a company skip an audit it legally owes, the other scares a qualifying company into paying for one. ## The threshold table | | Phase 1 | Phase 2 | Phase 3 | | --- | --- | --- | --- | | **Financial period commencing** | on or after 1 Jan 2025 until 31 Dec 2025 | on or after 1 Jan 2026 until 31 Dec 2026 | on or after 1 Jan 2027 | | **Submission year** | from 1 Jan 2026 | from 1 Jan 2027 | from 1 Jan 2028 | | **Turnover** | RM1,000,000 | RM2,000,000 | RM3,000,000 | | **Total assets** | RM1,000,000 | RM2,000,000 | RM3,000,000 | | **Number of employees** | 10 | 20 | 30 | Phase 3 figures remain unchanged unless reviewed by the Registrar. ## The test A private company qualifies if it meets **at least two of the three** criteria, for the **current financial year and the immediate past two financial years**: 1. annual revenue does not exceed the threshold 2. total assets do not exceed the threshold 3. number of employees does not exceed the threshold Nine data points, six of which must land inside the limits — two criteria across three years. A company can blow through one criterion by any margin in all three years and still be exempt. ## Which phase applies to you The phase is set by the date the financial period **commences**, not the year it ends and not the year you lodge. A company with a 30 June year end starting a period on 1 July 2026 sits in **Phase 2**, even though that year ends in 2027. ## The lookback trap The directive is explicit that the figures for the immediate past two financial years must not exceed the threshold **for the corresponding phase** — the phase of the current period. You do not test FY2025 against RM1 million when assessing a Phase 3 year; you test it against RM3 million. SSM's own worked scenario makes this concrete. A company with a 30 June year end reporting total assets of RM3,000,000 every year and revenue of RM1,000,000, RM1,000,000 and RM1,500,000 for FYE 2025, 2026 and 2027 qualifies for FYE 30 June 2027 under Phase 2: it fails the asset test in all three years but passes revenue and employees in all three. Two of three, three years running. ## Definitions that change the answer **Annual revenue** — revenue received and receivable during the year. It excludes credit entries reversing earlier accounting entries, entries relating to taxation, reversals of provisions made earlier, and gains on derecognition of property, plant, equipment and investment property in the statement of comprehensive income. **Total assets** — assets as defined in the applicable approved accounting standards, current and non-current, taken from the statement of financial position. **Employees** — full-time employees employed at the end of each relevant financial year. SSM defines full-time as paid workers working not less than six hours a day for at least 20 days a month, or at least 120 hours a month. Below that, a worker is not counted at all. Included: local, foreign, contract workers, and workers on probation. Excluded: a director who is also a full-time employee; a shareholder who is also a full-time employee; family members or friends who are unpaid or on irregular wages. In an owner-managed Sdn Bhd with two working director-shareholders, a spouse on irregular pay and six part-timers on 15 hours a week, the count for the directive is zero — not nine. ## Common mistakes - **Quoting RM3 million and 30 employees as the current figure.** They are the Phase 3 numbers. Nothing above RM1 million of revenue passes the revenue test for a period that commenced in 2025. - **Requiring all three criteria.** The directive says at least two. - **Testing only the current year.** Three years must clear the bar, and a company newly under the limit this year will usually wait. - **Using the financial year end to pick the phase.** It is the commencement date. - **Re-testing prior years against the older, lower thresholds.** The directive and SSM's scenarios both apply the current phase figures across all three years. - **Counting part-timers and working director-shareholders** in the headcount. - **Assuming the transition was seamless.** Financial periods commencing on or before 31 December 2024 remain under the revoked PD 3/2017, so some companies had a year in which neither regime helped them. ## What's next Clearing the thresholds is necessary but not sufficient. Four categories of company are shut out of the exemption regardless of size, and members holding 5% of the shares can still compel an audit — check the exclusion list before you tell the auditor you will not need them this year. ## Sources - Practice Directive No. 10/2024 — Qualifying Criteria for Audit Exemption for Certain Private Companies in Malaysia — https://www.ssm.com.my/Pages/Legal_Framework/Document/PD10-2024-Qualifying-Criteria-for-Audit-Exemption-for-Certain-Categories-of-Private-Companies.pdf (SSM) - FAQs on Companies Act 2016 and Transitional Issues — Part Q, Audit Exemption — https://www.ssm.com.my/Pages/Legal_Framework/Document/FAQ-AUDIT-EXEMPTION.pdf (SSM) - Companies Act 2016 (Act 777), reprint as at 1 August 2022 — https://www.ssm.com.my/Pages/Legal_Framework/Document/Companies%20Act%202016_Akta%20777_BI%20(1.8.2022).pdf (SSM) --- Source of truth: https://github.com/negaraku-md/NegaraKu.md License: CC BY-SA 4.0