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Reporting requirements

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Reporting entities must submit reports on their payment terms and practices for their small business suppliers. These reports:

  • are due each six months of an income year 
  • must include payment information on the goods and services procured from small business suppliers under a trade credit arrangement 

A trade credit arrangement is a broad term. It is where a business and a supplier agree that payment for goods and services will be made after the supply.

The agreement can be a written contract or oral agreement. It can also be a partly written and partly oral. It is any agreement between two or more parties that is intended to be legally binding.

Unless otherwise stated, all reported values should be:

  • to the nearest whole number
  • in Australian dollars
  • inclusive of GST

To calculate the value of an invoice, it is the actual amount shown on the invoice. This is disregarding any discount or rebate that is applied at the time of payment.

Entity responsible for reporting in relation to a payment

Entities need to report on all the small business invoices that they have a legal responsibility to pay. This responsibility rests with the entity that has contracted a small business supplier to procure a good or service. This even applies where an administrative arrangement or the contract allows another entity to make the payment.

For some reporting entities this will involve reporting on small business invoices paid by them directly. For other entities it will involve reporting on small business invoices paid on their behalf through another entity. This paying entity may be an agent, broker, shared service entity or special purpose vehicle.

In contrast, an agent, broker or special purpose vehicle may contract with a small business supplier and distribute the goods to other entities. In this case they would need to report in relation to the invoice payments. This is because they are the contracting party and have a legal obligation to make the payments.

Example:

An Entity X has procured goods from a supplier and agreed that Shared Service Entity Y will pay the invoice. Entity X must report in relation to that invoice. This is because they procured the goods from the supplier and are therefore contractually obligated to pay. Entity Y will not need to report on the invoice payments as they did not contract the supplier. The legal obligation regarding the payment rests with contracting Entity X.

Entities that don’t purchase any goods or services

A reporting entity may not purchase goods or services from small business suppliers. Therefore, it does not pay any small business invoices in a reporting period. They would still need to complete a Payment times report including nil values where applicable.

Items to report

The following items must be included in a Payment times report. 

The Payment times report template is available https://paymenttimes.industry.gov.au/. Registered entities can access the template prepopulated with their entity information by logging into the reporting portal.

The template comes in two parts:

  • a .csv file to input the payment information
  • a word file for signatures and associated declarations

Instructions for the report including information on the data validation requirements, are available at https://paymenttimes.industry.gov.au/

Item Description

Entity name and ABN

This is the entity’s business name as registered on the Business names register and their ABN if it has one. Some entities such as foreign entities may not have an ABN.

Entity’s controlling corporation name and ABN

This is the entity’s controlling corporation’s business name as registered on the Business names register and their ABN.

Entity’s head entity name and ABN

This is the name of the partnership, trust or entity type (other than a controlling corporation) which is the head entity and their ABN.

Entity’s primary industry

The primary industry of the entity is based on the ATO’s Business industry codes. This is the entity’s primary, or main business activity. For example:

  • if the majority of employees work in one section of the organisation, the day-to-day duties of this section would be the main activity
  • if the majority of income is generated by a particular industry then this would be the main activity

Where the entity operates in multiple industries, they should report the code that best describes their main business activity. For example, if 60% of employees work in one section of the business, the day-to-day duties of this section would be the main activity.

The primary industry of the entity is based on the ATO’s Business industry codes.

Reporting period

This is the period the report relates to.

Details of the person who submitted the report

This includes the person’s name, role, phone number and email address.

This personal information will not be made publicly available.

Approver of the report

This includes the name of the responsible member who approved the report and the date the report was signed as approved.  

The responsible member is an individual member of the entity’s principal governing body who is authorised to sign the Payment times report. For example, if the entity is:

  • a constitutional corporation: a member of the principal governing body (e.g. the Board) who has the company’s express or implied authority to sign the report on behalf of the company
  • a partnership: a partner of the partnership with authority to act on behalf of the partnership
  • a superannuation fund: the trustee, which may be an individual or a corporation (the same as that of the constitutional corporation)
  • a trust: the trustee, which may be an individual or a corporation (the same as that of the constitutional corporation)
  • a sole trader: that individual is the responsible member
  • under administration: the administrator is the responsible member

A responsible member of a controlling corporation, or a person acting for a responsible member under a Company Power of Attorney, can be the signatory for the Payment times reports of the entire group of member entities.

Where a person is acting for a responsible member under a Company Power of Attorney, they must state this arrangement in the Payment times report.  

Personal information about the responsible member provided in a Payment times report will not be made publicly available.

Entity’s principal governing body

This includes the name of the principal governing body of the entity.

The principal governing body is the body, or group of members of the entity, with primary responsibility for the governance of the entity. For example, if the entity is:

  • a constitutional corporation: the board
  • a partnership: the partners
  • a trust or superannuation fund: the trustee (which can be an individual or corporation, if it is a corporation, then it would be the board)

A declaration by a responsible member

A responsible member of the entity must declare that they will provide the report to the principal governing body of the reporting entity. This must include the date it will be provided.

It is best practice that the Payment times report is provided to the entity’s principal governing body at the earliest available opportunity. This is generally before the next Payment times report is due.

Standard payment periods

The standard payment period must be reported including the shortest and longest standard payment periods that the entity offers to its small business suppliers (at the beginning of the reporting period).

The standard payment period is the supply payment period on offer for inclusion in the entity’s contracts with small business suppliers. The shortest and longest standard payment periods refer to the shortest and longest standard payment periods, offered to small business suppliers.

The entity must also report any changes made to these periods during the reporting period (at the end of the reporting period).

There are no penalties under the scheme for not paying small business suppliers within a large business’s standard payment periods.

The supply payment period is when the payment is required to be paid disregarding any supply chain finance arrangements.

In some cases there is no standard supply payment period on offer. In this case, it is the supply payment period most commonly included or the majority period used in the entity’s contracts with small business suppliers. The ‘most commonly included’ supply payment period should be determined based on the number of contracts entered into with small businesses suppliers, not the value of the contracts entered into.

In circumstances where the standard payment period on offer is a date range or period, this must be reported as the highest number of calendar days in the date range or period. For example, a standard payment period of 30 to 60 days would be reported as 60 days. Similarly, a standard payment period of ‘payable within 30 days of the end of the month’ would be reported as 61 days.

Standard payment periods can be found in a written contract or orally agreed with the small business supplier. When a business buys goods or services from another business, both parties generally enter into (or act under) a contract that includes payment terms. This contract or agreement is intended to be legally binding.

Standard payment periods example

Entity X offers three payment periods to its small business suppliers (per the contract) in its first reporting period:

  • perishable goods: payment terms of 15 calendar days
  • long life goods: payment terms of 20 calendar days
  • repair services: payment terms of 30 calendar days

The majority of the entity’s contracts are with its small business suppliers that supply long life goods. They want to improve the payment terms for small businesses halfway through the reporting period. To do this, the entity changes all its payment terms for long life goods. It changes it to 15 calendar days with all its active contracts with small business suppliers.

The entity would report the following standard payment periods in its Payment times report. It would also include an explanation for the changes in their standard payment terms:

  • standard payment period = 15 calendar days
  • shortest payment period = 15 calendar days
  • longest payment period = 30 calendar days

The standard payment period changed from 20 calendar days to 15 calendar days during the reporting period.

Small business invoices paid

The proportion, determined by total number and total value, of small business invoices paid by the entity during the reporting period in each of the following:

  • within 20 days after the issue day
  • 21-30 days after the issue day
  • 31-60 days after the issue day
  • 61-90 days after the issue day
  • 91-120 days after the issue day
  • more than 120 days after the issue day

The proportion, by total number and total value, of small business invoices paid by the reporting entity needs to be reported, in aggregate, against each of these day bands. These proportions should be expressed as a percentage.

Days refer to calendar days. For example, weekends and public holidays must be included in these day bands.

Issue day refers to when the invoice was received.

Small Business procurement

The total proportion (by value) of business procurement during the reporting period that was from Australian small business suppliers. The entity must provide data on the total proportion of all invoice payments during the reporting period that was from small business suppliers compared to all invoices paid.

For example, if an entity paid $50 million in small business invoices and paid $200 million invoices in total the proportion reported as a percentage is 25%.

In calculating the proportion of invoices paid, a reporting entity who is a member of a controlling corporation should exclude invoices from any business that is also a member entity of their group. This includes invoices from small businesses who are a member of the same group.

However invoices from small businesses that are part of another controlling corporation or group or likewise identified by the Small Business Identification tool should be included.

A reporting entity should also refer to all invoices that are paid for the supply of goods and services in calculating their total procurement. This includes invoice payments for good and services made outside Australia.

Invoice payment that relate to the procurement for the following may also be excluded:

  • payments which do not have trade credit arrangements. For example, payments for rental leases that are pre-paid and travel expenses (including airfares, hotels, taxi, etc.) and restaurant or cafe expenses
  • payments related to employees, whether through payroll or through reimbursements

To calculate the value of invoices paid using foreign currency, entities may use the “Foreign exchange rates Translation (conversion) to Australian dollars – foreign currency exchange rates to use” guidance available on the ATO’s website.

As the value of a foreign currency invoice (in Australian dollars) is determined at the time of payment, the payment date should be used to determine the value. This will be the amount in Australian dollars that forms part of the total proportion (by value) of business procurement.

Use of supply chain finance

Details of the use of supply chain finance including whether the entity offers these arrangements for small business suppliers. If used, report the proportion (by value and number) of small business invoices paid under these arrangements during the reporting period. This includes information on any benefits the entity received from providers of those arrangements.

For the purpose of the scheme, supply chain financing is defined as any arrangement in which a reporting entity undertakes or agrees to pay a small business invoice before the agreed supply period, in exchange for the small business accepting a discount on the payment. The payment could be made by the reporting entity or through a third party.

Supply chain financing is also known as settlement discounts, reverse factoring or dynamic discounting. For example, it can include:

  • settlement discounts, where a supplier offers a reporting entity a discount in exchange for early payment;
  • dynamic discounts, where a reporting entity offers and funds early payment in exchange for a discount, typically after an invoice has been received;
  • reverse factoring, where a reporting entity offers a supplier early payment in exchange for a discount, with early payment funded by a third party.

It can involve:

  • a third-party financier
  • a broker
  • direct negotiation between the large business and the small business supplier

The entity must provide details of any supply chain finance that is provided or used with their small business suppliers. These include:

  • details and a description of the type(s) of supply chain finance
  • a statement of the proportion, determined by total number and total value, of small business invoices paid using these arrangements
  • details of whether a small business is required to sign up to use supply chain financing to receive payment or be eligible to supply to a reporting entity
  • whether the reporting entity receives any benefit, such as payment or commission, from providing supply chain finance. This relates only to benefits provided by third party providers of supply chain finance.

To calculate the value of invoices paid through supply chain finance, the actual amount shown on the invoice should be used. This is disregarding any discount that may be subsequently applied in the payment to the small business supplier. This is because the invoice represents the obligation for an entity to make a payment. If the discounted amount is what is invoiced then this will be the relevant amount.

Small business invoices

Details of any arrangements under which small business invoices must be provided to the entity.        

The entity must report whether or not they have arrangements for accepting invoices like:

  • only accepting invoices on certain days of the month or at the end of the month
  • requiring a total amount to be spent before an invoice will be paid
  • imposing arrangements for progress payments
  • making payments dependent on the entity selling the goods or services provided by the small business

Entities are not required to report on the extent that these arrangements are used.

Small business practices or arrangements

Details of any practices or arrangements where a small business is required to pay an amount to participate in the entity’s procurement processes.

This could include a subscription or membership fee, payments to lodge a tender, or to lodge an invoice for payment.

Notifiable events

Details of any notifiable event that has occurred since the last Payment times report.       

Notifiable events include:

  • changes to an entity’s accounting period for income tax purposes
  • changes to their business name as registered on the Business names register
  • where a reporting entity is member of a controlling corporation’s group and its income falls below $10 million for two income years and will cease to be a reporting entity

Additional information

Any additional information to provide context or explanation in relation to the information provided in the report.

The entity can include any additional information to explain the information provided in the report. To determine whether to publish this information, the Regulator will assess if the information is commercially sensitive or includes personal information.