The Payment Times Reporting Act 2020 requires reporting entities to report on their payment terms and times with small suppliers in publicly available reports.
There is a Government website for the Payment Times Reporting Scheme (PTRS) which holds the rules and latest guidance material for reporting entities to view.
KPMG’s Payment Times Reporting specialists can help you prepare to comply with the new requirements.
The key elements to understand
Who must report?
By now, more than 4,000 large business groups will have received an early invitation to self-register for PTR or will have subsequently gone to the PTR website to investigate registration processes.
However, if you have missed this or think you might have recently met the requirements to report, we have covered the basic tests to satisfy the PTR regime and report.
A ‘constitutionally covered entity’ becomes a reporting entity at the start of its income tax year if it:
- carries on an enterprise in Australia
- satisfies a ‘total income’ threshold for the most recent income tax year,and
- is not a registered charity with the Australian Charities and Not‑for‑profits Commission.
Alternatively, if an entity gives appropriate notice to the Regulator, it may elect into the regime.
When will you need to report?
Reporting entities will need to report on a bi-annual basis dependent upon their year-end for tax purposes, they will then have 3 months to upload their report to the Payment Times Reporting Regulator via an online portal.
For most Australian businesses with a 30 June tax year end, they will need to look to its income for the year ended 30 June 2020 to see if it has a PTR obligation and the first reporting window will be from 1 January 2021 to 30 June 2021, with a first reporting deadline of 30 September 2021.
Who is a small business supplier?
An entity will be identified as a small business in the Payment Times Small Business Identification Tool (coming in December 2020) if it carries on an enterprise in Australia and its annual turnover was less than $10m for the most recent income year.
The way we understand the SBI Tool will work is:
- A reporting entity will need to upload their supplier data into the SBI Tool.
- Based on your suppliers’ ABN numbers, the SBI tool will flag which of your suppliers’ ABNs were not matched in the SBI Tool (because the Tool will seek to identify medium and large businesses) and are therefore small business.
What are the content and information requirements?
The new Scheme will require reporting entities to prepare and disclose a wide range of information in relation to their payment practices to those suppliers identified as small business suppliers.
In addition to factual information about the RE, the recent release of the Rules and Guidance Material provides further information required for the Payment Times Report and includes:
- % by total value, of all procurement by the Reporting Entity (RE) in the reporting period (RP) that was from Small Business Suppliers (SBSs)
- Standard Payment Periods (SPPs) on offer, or if none, most commonly used with SBSs (inc. longest & shortest SPPs at the start of the RP) plus any changes during RP. Rules now define SPPs
- % by total number & value, of certain SB Invoices (SBIs) paid by RE in RP within various date ranges after issue
- details of how SBIs are to be received/paid by the RE and details of any fees payable by a SB to participate in a RE’s procurement process
- whether the RE has any SB Supply Chain Finance Arrangements in RP (if so, further details including: various % disclosures of SB invoices paid under SBSCFAs; any commissions/benefits received from 3rd party SBSCFA providers and whether SBs were required to agree to use SBSCFAs to participate in a RE’s procurement process or for SB invoices to be paid)
- additional info to provide context to disclosures in PT report.
Once submitted, this information will then be lodged on a public Payment Times Reporting Register which will make this information readily available for the public to access free of charge.
What are the potential penalties and fines?
The newly appointed Payment Times Regulator has significant powers to monitor, investigate, appoint external auditors and impose infringement penalties up to 0.6 percent of annual income.
Penalties will not come into effect for the first 12 months and the Regulator will spend this time working with reporting entities to educate them about reporting.
Public reporting and the media
The relationship between large retailers and their small suppliers has featured in numerous Australian newspaper headlines in recent years and we saw this increase from May 2020 when Payment Times Reporting was first tabled in the House of Representatives.
Previous reporting was presumably based upon information obtained from suppliers, however, once reporting goes live from 1 July, we anticipate this to increase significantly as the media will have access to payment metrics on reporting entities.
Common issues to address prior to your first reporting window
- Data quality and accuracy for supplier ABNs.
- Inability to tag small suppliers in ERP systems.
- Failure to capture invoice receipt date.
- Inability to produce reports.
How our clients are setting themselves up for success
Payments Times Reporting is here, and businesses need to think about what they need to do now. However, with these changes comes the inevitability of impacts further down the line including, how businesses structure entities in their ERP, manage their data and working capital moving forward.
Through our work with clients, we have found knowing how to navigate these changes and setting yourself up for success can be complex. We have been supporting clients through the complexities of Payment Times Reporting to help them understand what’s expected, prepare for the changes and ensure they comply into the future.