- Large Businesses will be required to publish 6-monthly reports on their small business payment times and practices
- Daily penalties apply for failure to report
- The framework is expected to commence on 1 January 2021
The Australian Government has introduced to Parliament a Payment Times Reporting Framework (the framework) which requires large businesses with over $100 million in annual turnover to publish information on their small business payment times and practices. The Act, that underpins the framework, was referred to the Senate Education and Employment Legislation Committee on the 12th of June 2020. The committee is due to report its findings by the 30th of July and the framework is expected to commence on 1 January 2021 (pending report findings).
The framework requires large entities to prepare 6-monthly reports (2 reports for each income year) on their payment terms to small businesses. The reports will need to be submitted to the regulator 3 months after the end of each of the reporting periods. The reports will be placed on the publicly available Payment times reporting register.
Failure for large entities to report could result in daily penalties of 60 penalty points ($12,600) for an individual and 300 penalty units for a body corporate ($63,000) per a day. If a group of entities fail to report, for example due to an IT failure, that cost can be substantial as the penalty relates to each entity in the group per a day.
Who is captured?
- entities with assessable income (most recent income year) of at least $100 million
- If an entity is a controlling corporation or a member of a controlling corporation's group with total assessable income for all members of the controlling corporation's group for the most recent income year for the controlling corporation was at least $100 million
- reporting period for the report
- Information prescribed by the rules relating to the entity's payment terms and practices during the reporting period in relation to Its small business suppliers; and
- Include details of the principle governing body of the entity and
- If the entity is a member of a controlling corporation's group
- identify the controlling corporation and Include any other Information
The exposure draft also addresses how the act applies to Partnerships, unincorporated associations, trusts, superannuation funds and approved deposit funds that are trusts.
A legislative definition for a small business has not been made, making in unclear as to who (i.e. which small businesses) large entities will be reporting on as a part of the framework. The draft legislative instrument defines small business by reference to a Payment Times Small Business Identification Tool which is still yet to be developed by the Department of Industry, Science, Energy and Resources (the Department) and has not been exposed to public consultation.
At a regulatory cost of at least $22.5M per annum for large business, it is expected that the Payment Times Small Business Identifier Tool will be integrated into the accounting systems of large companies and will need to be regularly updated by the Department and the accounting systems of the reporting entities.
CA ANZ strongly supports the prompt payment of small business but has been advocating for a simpler less costly way to implement this policy resolution.
Read the payment times reporting bill exposure draft
A Bill for an Act to provide for certain entities to report payment terms and practices, and for related purposesRead the ED
Read the joint submission
Read CA ANZ’s joint submission with CPA Australia on the payment times reporting framework.Read submission