Australia | Publication | February 2021
A challenge often faced by small businesses in Australia are delays in getting invoices paid which causes liquidity and other issues, often constraining their ability to invest, hire staff and fulfil their own financial obligations.
The newly introduced Payment Times Reporting Act 2020 (PTR Act) and the Payment Times Reporting (Consequential Amendments) Act 2020 (together the PTR Acts) commenced on 1 January 2021. The PTR Acts and the related Payment Times Reporting Rules 2020 (PTR Rules) (together, the PTR Laws) impose new obligations on large businesses to report in relation to their payment terms and practices with small business suppliers.
The new PTR Laws are intended to improve transparency in supply arrangements between large and small organisations and to incentivise large businesses to improve payment times in their arrangements with small business suppliers.
Importantly, the PTR Laws introduces a reporting framework, but does not mandate any specific requirements for payment of small business suppliers.
This article is the first of a two-part series on the PTR Laws. In this article we consider who is required to report, when to report, what to include in a report, what is a ‘small business supplier’, what information is disclosed to the public, compliance and enforcement powers and what reporting entities should be doing now.
The statutory criteria for determining whether an entity must report under the PTR Laws are quite intricate and need to be applied on a case by case basis.
Broadly, an entity will be subject to the reporting obligations under the PTR Laws if it is a constitutionally covered entity (which include, amongst others a constitutional corporation and a foreign entity) that carries on an enterprise in Australia and in the most recent income year (based on information submitted in the previous year’s tax return):
However, a trust is an entity that may not be a reporting entity under the PTR Laws unless certain statutory criteria are satisfied.
The application of the PTR Laws is broad. It will include most private sector businesses (including foreign entities) and certain Commonwealth government entities. Registered charities are excluded from the operation of the PTR Laws.
An entity can also volunteer to become a reporting entity by providing written notice to the Payments Time Reporting Regulator (PTR Regulator) prior to the start of the relevant income year.
Reporting entities must provide the PTR Regulator with a ‘payment times report’ for each reporting period, being 6 months (PTR Report). A PTR Report must be provided for the first 6 months of the income year for the business and the second 6 months of each income year. The income year is based on the business’ financial year used for tax purposes.
This means that, for businesses with a calendar year as its income year, the first PTR Reports will be in respect of the period ending 30 June 2021. PTR Reports must be lodged within 3 months after the end of each reporting period, so the first reports will be due by 30 September 2021.
The mandatory content of a PTR Report is set out in detail in the PTR Act, and the PTR Rules may prescribe additional content. Key information to be reported includes:
Standard payment period details: details of the shortest and longest standard payment periods that the business offers to its small business suppliers, as well as details of any changes to the standard payment periods used by the business during the relevant reporting period (including the shortest and longest payment periods).
In order to identify this information, reporting entities may need to review their contracts with small businesses to identify the payment periods included in the supply contracts, although there is some flexibility in the approach that may be taken.
Invoice information: a business must determine and state the proportion of small business invoices (determined by total number and value) which it paid during the reporting period in accordance with the following categories:
a. less than 20 days following the issue of the small business invoice;
b. between 21 – 30 days after the issue day;
c. between 31 – 60 after the issue day;
d. between 61 – 90 days after the issue day;
e. between 91 – 120 days after the issue day; and
f. over 120 days after the issue day.
This will require businesses to identify the actual payment times (that is, despite what is set out in the relevant contract). Reporting entities will need to ensure that their accounting systems are recording the number of calendar days that each invoice takes to be paid (from the day of issue).
Procurement details: the proportion (determined by total value) of all procurement during the relevant reporting period which was sourced from small business suppliers (as compared to all invoices paid during the relevant period).
Notifiable events: information regarding any ‘notifiable event’ which has occurred since the submission of the last PTR Report by the business to the PTR Regulator. Under the PTR Act, notifiable events include changes to the business’ applicable accounting period, a change of business name on the Business Names Register and any other event which is classified as ‘notifiable’ under the PTR Rules.
Supply chain finance: details of supply chain finance arrangements. Supply chain finance is defined in the PTR Rules as an arrangement under which an entity agrees to pay small business invoices, or arranges for a third party to pay small business invoices, earlier than the end of the relevant supply payment period in exchange for the small business supplier accepting discounts on the payments.
This can include finance provided by third party financiers, a broker or arrangements between the large business and the small business supplier (e.g. early payment discounts).
If these arrangements are used, the reporting entity will need to report the proportion of invoices paid using these arrangements. Details will also need to be provided on whether small businesses are required to agree to the finance in order to participate in the entity’s procurement processes or receive payment.
Invoicing arrangements: any arrangements an entity has for accepting invoices or participating in a procurement process, such as accepting invoices only on certain days of the month or requiring a certain amount to be spent (e.g. a subscription or membership fee) before paying any invoices.
Additional information: any other information or documents prescribed by the PTR Rules.
Although the PTR Laws do not prescribe any specific payment time frames within which a small business supplier must be paid, the intention is for the reporting regime to incentivise large businesses to make payment to their small business suppliers more promptly, as their reported payment times will be available on the public register.
The report must be signed by a responsible member of the entity or where the entity is a member of a controlling corporation’s group, by a responsible member of the controlling corporation.
A small business supplier is an entity described as a small business in the Payment Times Small Business Identification Tool that supplies goods or services. These are suppliers that carry on an enterprise in Australia and have an annual turnover of less than $10 million for the most recent income year.
The Payment Times Small Business Identification Tool is available online and is intended to help reporting entities identify their small business suppliers. It requires reporting entities to enter through a myGOV identification process. Reporting entities will be able to upload a list of their suppliers and the tool will screen those suppliers that are medium and large businesses, and then provide the reporting entity with a list of only those suppliers that are small business suppliers.
Small businesses are able to opt out of being identified as small businesses in the Small Business Identification Tool.
The PTR Act provides for the establishment of a Payment Times Reports Register (PTR Register). This register will be available online for public inspection and will contain PTR Reports submitted to the PTR Regulator. The PTR Regulator retains the discretion to decide to not publish certain information within the PTR Reports if it considers that this would be contrary to the public interest. In doing so, the PTR Regulator is permitted to have regard to whether the information in question is personal information (as defined under the Privacy Act 1988 (Cth)), whether the information is commercial-in-confidence and any other matters prescribed by the PTR Rules.
The PTR Regulator has the power to publish the identity of reporting entities which have failed to comply with the PTR Laws and specific details of their non-compliance on the PTR Register.
The PTR Regulator is given a number of enforcement powers in connection with the PTR Laws including:
A grace period of 12 months is in force (from 1 January 2021), during which the obligations under the PTR Laws commence, however the compliance and enforcement powers under the PTR Act will not be used by the Regulator. At the end of the grace period, the following maximum civil penalties may apply:
| Offence | Penalty |
| Failure to provide a PTR Report within 3 months of the end of the reporting period for the income year |
60 penalty units ($13,320) |
| Providing false or misleading information in the PTR Report | 350 penalty units ($77,700) or 0.6% of the reporting entity’s total income for the income year in which the contravention occurred |
| Failure to comply with record-keeping requirements for at least 7 years after the end of the reporting period | 200 penalty units ($44,000) or 0.2% of the reporting entity’s total income for the income year in which the contravention occurred. |
| Failure to comply with an audit notice issued by the PTR Regulator | 60 penalty units ($13,320) |
| Failure to provide an auditor with reasonable facilities and assistance necessary for the effective exercise of their duties | 200 penalty units ($44,000) or 0.2% of the reporting entity’s total income for the income year in which the contravention occurred. |
In addition to the penalties that may be applied, entities failing to comply with the PTR Laws could face significant reputational damage if the PTR Regulator publishes details of non-compliance with the PTR Laws. The PTR Regulator’s power to “name and shame” entities that do not comply with the PTR Laws (as detailed above) is also intended to incentivise compliance.
Large businesses should promptly assess whether the PTR Laws will apply to them. This in itself may be quite a task, as the definitions of those captured by the PTR Laws are complicated, and in large corporate groups all group entities may not be required to report under the PTR Laws.
If large businesses are required to report under the PTR Laws, there are a number of initial steps that should be considered promptly given that the PTR Laws have now commenced. Some of the key issues to think about in preparing for compliance with the PTR Laws are as follows:
Identify small business suppliers: Large businesses must identify which of their suppliers are small businesses. This can be done using the Small Business Identification Tool. Businesses will also need to ensure that if the status of any of its suppliers changes over time (i.e. medium-sized businesses become small, or new small business suppliers are added), that the necessary information required to report about the supplier is available for the relevant period.
Accounting and finance systems: Once the small business suppliers have been identified, impacted businesses must ensure that their accounting and finance systems are adapted to ensure that the information to be reported in the PTR Report is captured in these systems for all small business suppliers.
Businesses should also ensure that they have sufficient protocols in place to retain records of all the information they have utilised for the preparation of their PTR Report (for at least 7 years following the end of the relevant reporting period).
Responsibility for compliance: Affected businesses must nominate a responsible person who will approve and sign all relevant reporting which is submitted to the PTR Regulator. The responsible person should be informed about their legal obligations and should devise protocols to ensure the timely discharge of their duties. Existing governance structures should be updated to ensure that compliance with the PTR Laws is incorporated into the existing compliance framework.
Accuracy of data: Given the significant consequences of non-compliance with the PTR Laws, and in particular for submitting false or misleading PTR Reports, businesses must ensure that measures are put in place to enable the accurate reporting of data. Reporting entities should test the integrity of data received from business systems to ensure that it is accurate and that any new accounting systems or processes implemented for compliance with the PTR Laws are accurately capturing the data to be reported.
Supply arrangements with small businesses: Those entities required to report under the PTR Laws will need to review the payment terms on offer for inclusion in their small business contracts. This may be a good time to also review an entity’s contract templates including the appropriateness of the payment terms and any supply chain finance offered to small businesses.
Next month (in the second of our two-part series), we will publish a further article on the new PTR Laws, looking at practical implications and some of the issues we have come across in advising clients in relation to these new laws.
Please contact us if you need assistance in understanding the application of the PTR Laws to your organisation or more generally in relation to these new obligations.
Publication
In For Women Scotland Ltd v The Scottish Ministers, the Supreme Court unanimously held that the definitions of “man”, “woman” and “sex” in the Equality Act 2010 refer to a person’s biological sex.
Subscribe and stay up to date with the latest legal news, information and events . . .
© Norton Rose Fulbright LLP 2025
