The Federal Government has passed legislation which seeks to improve cash flow pressures for small business. Under the Payment Times Reporting Act 2020, businesses and government enterprises with a total annual income of over $100 million will need to report biannually on their payment terms and times for their small-business suppliers. The reporting scheme will take effect from 1 January 2021.
It has been estimated that over 10,000 entities from large business groups would be required to file reports with a newly established Payment Times Reporting Regulator.
The intention of the scheme is to publicise payment behaviour by large businesses in their dealings with small businesses (that can be compared across industries or subsets of businesses) and encourage payment to small businesses within shorter periods.
Key features of the scheme include:
- large businesses being required to publish biannual reports on their small business payment times and practices; and
- the imposition of daily penalties for failure to report.
The legislation does not impose specified terms or a specified number of days to pay small business suppliers.
Who is covered?
The reporting requirements apply to entities that carry on an enterprise in Australia whose gross accounting income in the most recent income year was greater than $100 million (or $10 million if the entity is part of a group yielding combined annual income of more than $100 million).
The entities covered include private and public companies, trusts, partnerships, joint ventures, sole traders, foreign entities, government entities and body corporates. Registered not-for-profits are exempt.
From 1 July 2021, eligible entities will need to submit biannual reports to the Payment Times Reporting Regulator who will publish these reports on a central public register.
The register will show:
- the reporting entities’ details;
- the shortest and longest standard payment periods offered by the reporting entity to small businesses;
- the proportion, determined by total number and total value, of small-business invoices paid by the business during the reporting period within certain payment periods; and
- the proportion (by value) of procurement from small-business suppliers during the reporting period.
The legislation provides for penalties to be imposed for failure to:
- report, notify the Regulator of changes, or comply with a notice of audit (for each day of noncompliance); and
- failure to keep appropriate records and to provide an auditor with the necessary assistance to undertake its audit.
How can we help?
Please get in touch if you would like further detail regarding the proposed changes and how they might affect your business.
Zafra Disclaimer: this article is intended to provide commentary and general information only. It should not be relied on as legal advice. Formal legal advice should be sought in the particular transaction or matters of interest arising from this article.