How Payment Times Reporting may impact your business

Who needs to lodge a Payment Times Reporting submission?

Under the Payment Times Reporting Scheme, reporting entities are required to lodge bi-annual reports to the Payment Times Reporting Regulator (the Regulator). The key $100 million revenue threshold test for determining whether an entity is a reporting entity has been updated to refer to the total revenue worked out in accordance with relevant accounting standards.

In the case of corporate groups, the $100 million revenue threshold will be assessed against the head entity’s consolidated accounting revenue, which will cover all entities which the entity controls for accounting purposes. Under the Amendment Act, the definition of "control" is based on AASB 10, which defines control as the power to govern the financial and operating policies of an entity to obtain benefits from its activities.

From a practical perspective, this adjusted interpretation of an entity controlled by the head entity may now result in the the inclusion of revenue of foreign subsidiaries in a group where they are part of the consolidated accounting revenue.

For more information, read: Payment Times Reporting for large business >

When will you need to report your Payment Times metrics?

Reporting entities are required to lodge a Payment Times Reporting submission every 6 months. They will then have 3 months to prepare and lodge their report to the Regulator via the Payment Times Reporting online portal.

For most Australian businesses with either a 30 June or 31 December year end, the relevant submission deadlines are 31 March and 30 September. The lodgement date for the first report under the new rules has been extended to 30 June 2025 for any reporting entities with a December or June year end.

Who is defined as a small business supplier under the Payment Times Reporting Scheme?

The Payment Times Reporting Scheme’s primary concern is the timely payment of invoices to small business suppliers. As such, the accurate identification of small business suppliers is a key aspect of the Scheme.

To provide clarity in this area, the Regulator launched its Small Business Identification Tool (SBI tool) in 2021 when the Scheme first commenced. The SBI tool remains in use following reforms to the Scheme and continues to apply under the Amendment Act, enabling reporting entities to determine which of their suppliers are considered a ‘small business’.

Under the Scheme, an entity is defined as a small business if it carries on an enterprise in Australia and for its most recent income year its total income was less than $10 million. It's important to note that the definition of total income in this context relates to the total income of the business itself – not what is spent by a reporting entity with that supplier.

The SBI tool functions by analysing a reporting entity’s supplier ABNs and then flagging those which belong to a supplier that is considered a small business supplier under the Scheme. Reporting entities are encouraged to either run the SBI tool following the reporting period end date, or at regular intervals throughout the year.

What should you include in your payment times report?

The Scheme requires reporting entities to prepare and disclose a wide range of information in relation to their payment practices to their small business suppliers. Under changes introduced by the Amendment Act, the list of information required for reporting has changed significantly compared to the original legislation. For ease of reference, key data points required for disclosure under the Amendment Act include:

• shortest, standard most common (mode) and longest payment terms offered to small business suppliers for the Group
• estimated standard payment term for the Group’s next reporting period
• whether the standard receivable term is shorter, longer, or the same as the mode payment term to small business suppliers
• average and median payment times to small business suppliers for the Group
• 80th and 95th percentile values for payment time to small business suppliers for the Group
• percentage of small business invoices paid within agreed payment terms
• percentage of small business supplier invoices paid within specified date ranges
• percentage by total value of procurement by the reporting entity in the reporting period that was from small business suppliers
• proportion of small business payments that used Peppol-enabled systems
• additional information to provide context to disclosures.

Once submitted, this information will then be lodged on the publicly available Payment Times Reporting Register where metrics can be assessed against other reporting entities and industry averages.

Payment Times Reporting – Slow and Fast Small Business Payers

The Amending Act introduces the concepts of Slow and Fast Small Business Payers, thereby providing motivation to promote fair and improved payment practices to small businesses. Being labelled as a Slow or Fast Small Business Payer will have numerous implications under the Act and we encourage all reporting entities to be familiar with these impacts. A summary is outlined below:

• Slow Small Business Payer: A reporting entity who qualifies as a Slow Small Business Payer can be issued a direction by the Minister for Small Business (or the Regulator as delegate), requiring the entity to publish on their website and other documentation that they are a Slow Small Business Payer. Slow Small Business Payer directions are disclosed and made publicly available on the Payment Times Reporting Register.
• Fast Small Business Payer: A reporting entity who qualifies as a Fast Small Business Payer will receive recognition for their positive payment practices and be published in a 'Fast Small Business Payer' list on the Payment Times Reporting Register by the Regulator.

What is the definition of a Slow Small Business Payer?

A Slow Small Business Payer is identified based on the reporting entities 95th percentile payment time to small business suppliers compared to other reporting entities; overall and within their ANZSIC Division.

A reporting entity qualifies as a slow Small Business Payer if:

• The reporting entity ranks in the slowest 20% of Small Business Payers during a reporting cycle, or
• The reporting entity ranks in the slowest 20% of Small Business Payers within its ANZSIC Division during a reporting cycle.

Reporting entities with a 95th percentile payment time of 30 days or less cannot be classified as a Slow Small Business Payer.
The Minister can issue a direction if an entity qualifies as a Slow Small Business Payer for two consecutive reporting cycles.

What is a Fast Small Business Payer?

• A Fast Small Business Payer is identified from the 95th percentile payment time reported in submissions. An entity qualifies as a Fast Small Business Payer if for two consecutive reporting periods, it has a payment time of 20 days or less.

A designation as a Fast Small Business Payer automatically expires nine months after the end of the reporting period in which the entity qualified unless the entity continues to submit a report with payment times of 20 days or less.

What other Payment Times Reporting Scheme implications should you consider?

Given that all Payment Times Reporting submissions are made publicly available on the Register and Slow or Fast paying small business can be publicly named, reporting entities should consider the reputational risks that are at stake. Previously, the media and key stakeholders for small businesses have been vocal in voicing their concerns over small business payment practices, which is something we anticipate to continue in the future.

What are the potential penalties and fines for non-compliance with the Payment Times Reporting Act?

The Regulator continues to hold extensive enforcement and compliance powers. These powers include but are not limited to the following:

• Where a reporting entity fails to report, the maximum potential penalty for incorporated entities is 300 penalty units.
• Where a reporting entity submits a false or misleading report, the maximum penalty is up to 0.6 percent of total income for the entity’s most recent income year.

The Regulator also holds the power to issue civil penalties when a reporting entity fails to comply or reasonably assist with a compliance audit or where a reporting entity fails to retain records.

What are the common challenges with Payment Times Reporting preparations?

Based on our experience advising a wide range of clients in navigating the Scheme, there are often common challenges confronted by even the largest and most resourceful businesses. These include:

• data quality and accuracy for supplier ABNs
• data capture for credit card and procurement card spend
• ensuring all entities with the consolidated group capture the required data fields
• aligning methodology and assumptions to the latest guidance material.