Home » Australia’s new Payment Times Reporting Scheme will commence 1 January 2021

Australia’s new Payment Times Reporting Scheme will commence 1 January 2021

Posted by Colin Miller | 01 December 2020 | Corporate Finance

Large businesses in Australia will start the new year having to publicly report their payment practices to small businesses. 

Under the new Payment Times Reporting Scheme which commences on 1 January 2021, approximately 9000 large business in Australia will now be required to publicly report their payment terms and practices in respect of their small business suppliers.

The first reporting period under this new scheme will be from 1 July to 31 December 2021. The payment times report for this period must be given to the Regulator by 30 March 2022. Reporting entities will need to report on a bi-annual basis, with the second reporting period from 1 January 2022 to 30 June 2022.

Why do we have the Payment Times Reporting Scheme?

The primary objective of the Payment Times Reporting Scheme [1] is to provide increased transparency on the time it takes large business to make payments to their small business suppliers and thereby improve the speed of the payment processes overall.

Late payments are a significant source of financial pain for Australian small and medium businesses (SMBs), with an estimated $115 billion in payments from large businesses to SMBs paid late each year.

When SMBs are paid late, it pressures them financially and impacts investment and employment and constrains overall economic potential. Small businesses generate a third of private-sector gross domestic product and employ nearly half of all workers.[2]

Objectives of the Reporting Scheme

  • Capture increased information on the payment practices of large business and government agencies to small business suppliers.
  • Make the reported information publicly available, thereby providing transparency and influencing payment practices.
  • Apply a monitoring and compliance framework enabling the Regulator to publish non-compliance, require audits and issue infringement notices.

 

Who is a Large Business under the scheme?

Approximately 9000 large business and government agencies are expected to be subject to the Scheme. A Reporting Entity will be within the reporting threshold if it carries on business in Australia and is either a:

  • Large businesses and certain government enterprises with total annual income over A$100m.
  • Controlling Corporations where the combined annual income for all members is more than $100m.
  • Businesses with total annual income greater than $10m and part of a Controlling Corporation group.

 

Who is a Small Business Supplier?

A small business is expected to be any entity that carries on an enterprise in Australia with an annual turnover less than A$10m for the most recent income year.  

Reporting content

Basic information regarding the Reporting Entity must be provided with the key payment information being:

  • The shortest and longest standard payment periods that the business offers to small business
  • The proportion, determined by total number and total value, of small business invoices paid by the entity during the reporting period within certain payment periods
  • The proportion (by value) of procurement that was from small-business suppliers during the reporting period.
  • Whether supply chain finance is offered

 

When and how to report

The first reporting period is from 1 July 2021 to 31 December 2021.

The payment times report for this period must be given to the Regulator by 30 March 2022. Reporting entities will need to report on a bi-annual basis, with the second reporting period from 1 January 2022 to 30 June 2022.

The Regulator will establish and access be available from December 2020 to the full reporting portal. Submitted information will subsequently be made available on a public Payment Times Reporting Register also managed by the Regulator.

Potential penalties

Potential financial penalties are significant and include:

Nature of contravention Maximum penalties
Failure to report 300 penalty units* (which can be applied per day of non-compliance)
False or misleading reports 0.6 per cent of the total income year in which the contravention occurred
Failure to keep records 0.2 per cent of the total income for the income year in which the contravention occurred
Failure to comply with audit notice 200 penalty units (which can be applied per day of non-compliance)
Failure to reasonably assist the auditor 0.2 per cent of the total income for the income year in which the contravention occurred

Source: Payment Times Reporting Bill 2020. *On or after 1 July 2020 1 penalty unit equals $222

Additional guidance to be issued

More information about this will be available in the Guidance Material, scheduled for publication by the Regulator before 1 January 2021.

Recommended Action items

Large businesses should begin to engage stakeholders and SMB suppliers to consider the requirements of the Scheme.

Follow the Additional Guidance to be issued by the Regulator.

How can we help

For more information on the Payment Times Reporting Bill or this Update, please contact Nexus Group Principal Colin Miller on cam@nexuslawyers.com.au

Resources

[1] Payment Times Reporting Act 2020 and Payment Times Reporting (Consequential Amendments) Act 2020

[2] Xero Small Business Insights, Paying the price, Xero Small Business Insights, June 2019

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 This publication is © Nexus Law Group and is for general guidance only.
Legal advice should be sought before taking action in relation to any specific issues. 

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