- Large Businesses will be required to publish bi-annual reports on their small business payment times and practices
- Daily penalties apply for failure to report
- The framework will commence on 1 January 2021
The Payment Times Reporting Scheme which requires large businesses with over $100 million in annual turnover to publish information on their small business payment times and practices will commence on 1 January 2021.
The framework requires large entities to prepare bi-annual reports (2 reports for each income year) on their payment terms to small businesses. Reporting entities will be given a 12-month penalty free transition from the implementation date of the Scheme to enable them to familiarise themselves with the scheme and transition effectively. 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 ($13,320) for an individual and 300 penalty units for a body corporate ($66,600) per a day. If a group of entities fail to report, for example due to an IT failure, that cost could be substantial as the penalty relates to each entity in the group per a day.
Payment Times Reporting
A summary of Payment Times Reporting can be found here.
Who is captured?
- A reporting entity under the PTR is a constitutionally covered entity that carries on enterprise in Australia and has a total income that satisfies the income test.
- Other entities who wish to report can volunteer to become a reporting entity.
- Entities registered under the Australian Charities and Not-for-profits Commission Act 2012 are exempt.
What is a Constitutionally Covered Entity?
A constitutionally covered entity is defined as: -
- an Australian or foreign corporation covered by the Constitution.
- a foreign entity as defined in the income tax law (e.g. foreign trusts and partnerships);
- an entity that carries on an enterprise in a Territory (that is not a body politic) (e.g. certain Australian trusts and partnerships);
- certain body corporates incorporated or registered in a Territory;
- certain Commonwealth corporate entities.
What is the income test?
A constitutionally covered entity becomes a reporting entity at the start of an income year (the relevant income year) if the entity's total income for the most recent income year was:
- more than $100 million; or
- if the entity is a controlling corporation—the combined total income for all members of the controlling corporation's group for the most recent income year for the controlling corporation was more than $100 million; or
- if the entity is a member of the group of a controlling corporation (total income for the group is more than $100 million) —the total income for the entity for the most recent income year for the entity was at least $10 million
- The Reporting entity's name, ABN and its main business activity/primary industry
- Details on the principal governing body, and whether the entity is a member of a controlling group
- Details about the head entity if it (within a group of related entities) is not the controlling corporation in the PTR report.
- Details of the shortest and longest Standard Payment Periods (SPP) offered by the reporting entity to small business
- Outline any changes to SPP during the reporting period
- The proportion, determined by the total number and total value, of small business invoices paid by the reporting entity categorised into ranges of time (based on timing after the invoice was issued):
- < 21 days; 21-30 days;
- 31-60 days; 61-90 days;
- 91-120 days; and
- >120 days of issue
- details of any benefits, including commissions or other payments received by the RE from the providers of those arrangements.
- Details on if, during the period, small businesses were required to agree to use small business supply chain finance arrangements to participate in the entity’s procurement process or to receive payments in relation to SB invoices
- Details of the practices or arrangements used by the RE during the reporting period for receiving and paying small business invoices including any amount, subscription or membership fees that require small businesses to pay to:
- participate in the RE’s procurement process (including tenders)
- Accept a small business invoice issued by the small business
- Details of any notifiable event that has occurred since the last PTR report
- Any additional information providing context or explanation in relation to other information included in the PTR report.
Factors to consider when calculating payment times:
- A SB invoice is considered to be issued:
- On the date in which the SB invoice was received by the entity, in accordance with all requirements of the relevant written or oral contract
- On the date of the invoice
- SB invoices are considered to be paid on the day relevant: o cash payment is given to the SB supplier o cheque payment is given to the SB supplier o amount (debit) is transferred from the RE’s applicable account to the SB suppliers applicable account
- SB invoices paid under supply chain finance arrangements are considered paid at the end of the relevant supply payment period
- When calculating payment times, it is irrelevant whether a day is a business day or if the invoice is in dispute. Any invoices not paid under a trade agreement are to be disregarded and SB invoices received as a part of the controlling corporation’s group are disregarded.
Small businesses will be identified by reporting entities via the Small Business Identification Tool which is currently being developed by the Department of Industry, Science, Energy and Resources (the Department).
Payment Times Reporting Scheme
Visit the Department of Industry, Science, Energy and Resources (DISER) page for further information on the Payment Times Reporting Scheme.Read more