Be prepared for payment times reporting

By Scott Tobutt, Scott Tobutt
Partner
19 August 2021

Introduction of the Payment Times Reporting Scheme

From 1 January 2021, the Payment Times Reporting Act 2020 will require mandatory public reporting for most large businesses to report on its payment terms and times for payments to small business suppliers (businesses with annual turnover below $10m).

This change is hoped to provide information to small businesses, allowing them to make more informed decisions about their business dealings with larger businesses, including better understanding of how the payment terms may impact their cash flows. It is also envisaged that this reporting will assist in improving payment times from large to small businesses due to potential reputational impact. 

Who needs to report?

Businesses, other than charities, that have income that exceeds more than $100m in a year. The income threshold is measured using the taxable income of the business. It also includes consolidated entities whose consolidated income exceeds $100m in a year and any subsidiary whose income is over $10m.

  • Single entity >$100m income
  • Consolidated entity >$100m income
  • Single subsidiary of a consolidated entity >$10m income

What is to be reported?

Aggregated data about the reporting entity’s payment terms and practices will need to be provided along with the reporting businesses details and other relevant information. The report will need to be signed by a responsible member of the business.

When is reporting due?

The first reporting period is 1 January 2021 to 30 June 2021 with the report being due for lodgement before 30 September 2021, through an online portal. Reporting periods will be every six months continuously, with lodgements due three months after the end of the reporting period.

Potential consequences of non-compliance, in addition to reputation risk, include financial penalties for failure to report or inaccuracies in reporting.

How to prepare

We recommend that large businesses start to assess their readiness and ability to collect the required and relevant data and ensure this is of the required quality and accuracy. The type of information that will need to be reported includes:

  • The standard payment period (calculations based on your actual payment days);
  • Summary of small business invoices paid (disaggregated by payment days);
  • Value of procurement from small business compared to all procurement; and
  • Other qualitative information such as financing arrangements, prescribed invoicing terms, progress payment terms, etc.

To assist with collating your data, the Australian Government has developed a tool whereby you can upload a list of supplier ABNs and the tool will indicate which ABNs belong to small businesses which need to be considered in your report.

Additional information

For more information on the reporting requirements you can refer to Payment Times Reporting Scheme: guidance for reporting entities by the Australian Government or reach out to your local PKF Audit & Assurance representative for support, guidance and potential solutions.