Second time is a charm: The Payment Times Reporting Act 2.0
01 May 2024
Last year the Federal Government commissioned a review into the effectiveness of the Payment Times Reporting Act 2020 (Act). The findings were released in August 2023 and included a number of recommendations to improve the operation of the Payment Times Reporting Scheme (Scheme) and better achieve the overall objectives of the Scheme.
The Payment Times Reporting Amendment Bill 2024 (Bill) amends the Act to implement the Government’s response to the review.
What do I need to do now
- Review the proposed amendments to the Act;
- Consider whether your current reporting entities will remain reporting entities;
- Consider whether any entities not reporting may become reporting entities; and
- Consider whether you wish to nominate a nominee reporting entity.
1. Comparison of key features of new law and current law
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New law |
Current law |
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Entities that either carry on business in Australia, are incorporated in Australia, have their central management and control in Australia, or shareholder voting power in Australia, must provide reports on their payment times and practices to small businesses. An entity that controls a consolidated group of entities (based on the AASB standards concept of control), will provide reports on behalf of that entire group. A reporting entity must have an annual consolidated revenue of greater than $100 million to be required to provide reports.An entity that wishes to become a volunteering entity must apply to the Payment Times Reporting Regulator (Regulator).A volunteering entity may have its volunteering status revoked by the Regulator. |
Certain large entities that carry on an enterprise in Australia and have an annual income of greater than $100 million, must provide reports on their payment times and practices to small businesses. Entities that do not meet the criteria to be obligated to be a reporting entity, but wish to provide payment times reports, may do so by notifying the Regulator they wish to become a volunteering entity. |
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Entities may apply to the Regulator to alter the default reporting arrangements by either having another entity report on their behalf (reporting nominee) or have certain entities within the group report individually (subsidiary reporting entity), as appropriate to the reporting entity’s structure and circumstances. These entities will have reporting obligations under the Act.The Regulator may revoke a reporting nominee or subsidiary reporting entity’s status. |
No comparison. |
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Reporting entities are required to report twice annually based on the entity’s financial year. Reports may be published on the Payment Times Reporting Register (Register) automatically by a reporting entity. |
Reporting entities are required to report twice annually, based on an entity’s income year, on their payment terms and practices for their small business suppliers. Reports are published on the Register by the Regulator. |
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The Regulator may exempt, for no longer than two years, a reporting entity from its obligation to provide payment times reports, where appropriate with regard to the objects of the Act. |
No comparison. |
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An entity that no longer meets the criteria to be a reporting entity ceases being a reporting entity upon giving notice to the Regulator. |
An entity that no longer meets the criteria to be a reporting entity, ceases to be a reporting entity upon receiving a determination by the Regulator. |
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Where the Regulator is satisfied that an entity no longer meets the criteria to be a reporting entity, or has ceased to exist, the Regulator may determine that the entity has ceased to be a reporting entity. |
No comparison. |
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Where the Minister is satisfied that a reporting entity is a slow small business payer, the Minister may direct that entity to publish on its website and in other documents that it is a slow small business payer. The direction may be recorded on the Register. |
No comparison. |
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The Regulator’s monitoring and investigation powers are expanded to enable the Regulator to issue a notice requiring a person to produce documents and provide information to assist in the administration of the Act. |
The Regulator is given monitoring and investigation powers, consistent with provisions of the Regulatory Powers Act. The Regulator may search premises and inspect and copy any document on the premises. |
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The Regulator may accept an enforceable undertaking from an entity in relation to non-compliance with provisions of the Act that attract a civil penalty. |
No comparison. |
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Disclosure of protected information can be made by the Regulator for regulatory activities. |
No comparison. |
2. Detailed explanation of new law
a) Reporting entities
The Bill amends the criteria in the Act for determining if a constitutionally covered entity is a reporting entity. The amended criteria are that the entity:
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Criteria |
Commentary |
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carries on business in Australia; or |
Prior to these amendments, entities were reporting entities if they carried on an enterprise in Australia and met certain other criteria. This requirement is removed by the Bill and replaced by criteria that a reporting entity must carry on a business in Australia or otherwise satisfy alternative criteria. An entity (whether a body corporate or not), will be considered to be carrying on business in Australia if it undertakes any of the activities that section 21 of the Corporations Act 2001 sets out as the activities that would mean a body corporate is carrying on business in Australia. |
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is a company that is incorporated in Australia or, has either its central management and control in Australia, or its voting power controlled by shareholders who are residents of Australia; or is a corporate Commonwealth entity, or a Commonwealth company, within the meaning of the Public Governance, Performance and Accountability Act 2013; and |
Corporate Commonwealth entities or Commonwealth companies are explicitly included as while they do not satisfy the requirement of carrying on a business in Australia, it is intended that they are also a reporting entity if they meet the other relevant criteria |
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the entity’s consolidated revenue for the previous financial year is more than $100 million; and |
consolidated revenue’ of an entity means the total revenue of the entity for a financial year under the accounting standards, or if the entity controls another entity or entities, the total revenue of the entity and all of the entities it controls, considered as a group, for a financial year of the controlling entity. This may include revenue earned in Australia or overseas. An entity’s consolidated revenue is worked out in accordance with the accounting standards made by AASB. For the purposes of determining an entity’s consolidated revenue, the accounting standards are treated as applying to an entity, even if the standards do not otherwise apply to the entity for accounting purposes. If a paragraph of the definition of financial year in section 9 of the Corporations Act 2001 applies to the entity, then financial year has the meaning given by that definition. Where an entity does not have such a financial year, financial year means an entity’s income year. As a result, if an entity does not have a financial year specified by the Corporations Act 2001 or an income year under the Income Tax Assessment Act 1997 as no income tax is payable by the entity, then the entity uses a standard financial year of 12 months starting on 1 July or if the Rules prescribe a period of 12 months, that 12 month period. Based on these amendments, both the consolidated revenue test, as well as an entity’s reporting periods, will be aligned with the entity’s financial year. |
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the entity is not controlled by another entity that is a reporting entity; and |
this ensures that for a corporate group with a number of entities, only the entity at the top of the group is a reporting entity, providing a single report for the consolidated group |
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the entity is not registered under the Australian Charities and Not for profits Commission Act 2012 |
To be a reporting entity, an entity’s consolidated revenue for the previous financial year must be more than $100 million. |
b) Ceasing to be a reporting entity
- An entity ceases to be a reporting entity if at the start of a reporting period:
- an entity no longer meets the entity criteria to be a reporting entity;
- becomes controlled by another entity that is a reporting entity; or
- its consolidated revenue was less than $100 million for each of its two most recent financial years.
The Regulator also has powers to determine that an entity is no longer a reporting entity.
3. Exemptions from reporting obligations
The Regulator may exempt a reporting entity from its reporting obligations where the entity applies to the Regulator, and the Regulator is satisfied that it is appropriate in the circumstances to make a determination, having regard to the objects of the Act.
The exemption process is intended to address any potential anomalies that may occur where the criteria to become a reporting entity would inadvertently include an entity that is not intended to be a reporting entity. This may include if an entity that has a one off sale of assets that would for that financial year lead to a total consolidated revenue of greater than $100 million.
The determination must specify the day it ceases to have effect. Determinations apply for a maximum of two years from the date they start to take effect.
Applications to determine that an entity is an exempt reporting entity must be made in writing to the Regulator.
4) Subsidiary reporting entities
The Bill introduces a new category of entity in the Act known as a ‘subsidiary reporting entity’. This new category allows an entity, which is ‘controlled’ by a reporting entity, to provide its own payment times reports.
These amendments are intended to address anomalies which arise under the reporting entity definition, by providing the Regulator with the power to determine that an entity is a ‘subsidiary reporting entity’.
An example of where such a situation would arise is when a reporting entity is a participant in a joint venture. The joint venture may apply to the Regulator to be a subsidiary reporting entity and provide its own payment times report, and the reporting entity will provide its own payment times report, with the joint venture excluded from this report.
The Regulator may determine, in writing, that a constitutionally covered entity is a subsidiary reporting entity. The entity must apply to the Regulator and be an entity which is controlled by another entity that is a reporting entity.
A subsidiary reporting entity may, by written notice, inform the Regulator that they wish to cease being a subsidiary reporting entity.
5. Reporting nominees
Reporting nominees are an entity that has been approved by the Regulator to report on behalf of a reporting entity. .
The amendments address situations where a corporate group has several large businesses that are members of the group, which are reporting entities, operating in Australia but consolidate under a foreign entity that does not meet the criteria to be a reporting entity. The foreign entity may apply to be a reporting nominee and report on behalf of the reporting entities within the corporate group.
If an entity applies to the Regulator to become a reporting nominee for another entity and the Regulator approves, by written determination, the entity becomes a reporting nominee for that entity. An entity may apply to become a reporting nominee for more than one other entity.
To avoid doubt, a reporting nominee determination does not result in the reporting nominee becoming a reporting entity under the definition in the Act. However, a reporting nominee may still be a reporting entity in its own right under another provision of the Act.
A reporting nominee determination does not result in the other entity ceasing to be a reporting entity. The other entities remain reporting entities for the purposes of the Act. The intention of these amendments is to permit an entity to report for a reporting entity, where that entity is in an appropriate position to do so; not change the scope of entities covered by the Act.
Reporting nominee applications must also be approved by a responsible member of the applicant and state the name of that responsible member.
The Regulator may revoke a reporting nominee determination by written notice given to the reporting nominee and the other entity to which the determination relates.
Where the Regulator has determined that an entity is a reporting nominee for another entity, the reporting nominee or the other entity may, by written notice to the Regulator, inform the Regulator that the determination is to be revoked, if it has not already been revoked by the Regulator.
A reporting nominee is treated the same way as a reporting entity in respect of reporting obligations under the Act.
If a reporting nominee gives the Regulator a report that is false or misleading in a material particular, the reporting nominee is liable to a civil penalty of 350 penalty units.
Record-keeping requirements for a reporting nominee are the same as the requirements for reporting entities.
Where a reporting nominee has failed to give the Regulator a payment times report for another entity, the requirement to give that report continues to apply even if the reporting nominee ceases to be a reporting nominee for the other entity at any time after the end of the reporting period.
6. Extensions of time
An entity may apply in writing for an extension of time to lodge a report.
The Regulator may grant a short-term extension of up to 28 days for an entity to submit a payment times report, where the Regulator is satisfied that the entity requires additional time to submit a report.
The Regulator may grant a long-term extension of greater than 28 days for an entity to submit a payment times report, where the Regulator is satisfied that circumstances resulting in the need for further time were exceptional or outside the entity’s control.
The Regulator must not allow an entity further time to give a payment times report unless the entity made the application for further time within the period of three months.
7. Payment times reports register
The Regulator has the discretionary power to remove information in a payment times report from the register where the Regulator considers that making the information publicly available would be contrary to the public interest. When deciding to remove information in a payment times report from the Register, the Regulator must have regard to whether the information is personal information (within the meaning of the Privacy Act 1988), whether the information is commercial-in-confidence, and any other matters prescribed by the Rules.
Information is ‘commercial-in-confidence’ where the Regulator is satisfied that:
- further release of the information would cause competitive detriment to a constitutionally covered entity;
- removing the information from the register is likely to be effective in removing the information from the public domain;
- the information is not required to be disclosed under another Australian law; and
- removing the information from the register is likely to be effective in preventing the information from being readily discoverable.
The Regulator may engage with and publish the details of any constitutionally covered entity the Regulator is reasonably satisfied has failed to comply with the Act, whether they are a confirmed reporting entity, a reporting nominee, or an entity that the Regulator believes is a reporting entity but has not engaged with the Scheme.
8. Ministerial Direction - Slow Small Business Payers
The Bill inserts a new direction making power into the Act that empowers the Minister to make a written direction to a reporting entity that it is a slow small business payer, requiring the entity to take certain action.
A reporting entity is a slow small business payer for a particular reporting cycle if the reporting entity was within the slowest 20 per cent of small business payers for that reporting cycle.
The Minister may give a reporting entity a ‘slow small business payer direction’, if the Minister is satisfied of any of the following circumstances:
- the entity was a slow small business payer in two consecutive reporting cycles;
- the entity was a slow small business payer in a reporting cycle, and did not comply with a requirement to give a payment times report in the preceding reporting cycle; or
- the entity was a slow small business payer in a reporting cycle, and did not comply with a requirement to give a payment times report in the following reporting cycle.
A direction may only be given in the 12 month period following the end of the later reporting cycle in each of the above circumstances.
Before the Minister decides to give a direction to an entity, the Minister is required to give the entity a written notice of the proposed decision and the Minister’s reasons for the proposed decision, and invite the entity to make written submissions to the Regulator about the proposed decisions. If the entity chooses to make submissions, it must do so within 28 days beginning on the day the notice is given.
In considering whether to give an entity a direction, the Minister is required to have regard to:
- the entity’s history of compliance or non-compliance with the Act;
- the entity’s practices in relation to paying small business invoices;
- whether the slowness of the entity’s payments has been because of circumstances beyond the entity’s control;
- the likely costs and burden for the entity of complying with the direction, and whether that cost and burden is reasonable in the circumstances; and
- any written submissions made by the entity.
A slow small business payer direction may require the recipient entity to publish specified statements or information, or take reasonable steps to cause a constitutionally covered entity that the recipient controls to publish specified statements or information. The direction may include more than one such requirement.
The direction continues in effect until the earliest of the following:
- the day the entity gives the Regulator a payment times report with a 95 per cent payment time of 30 calendar days or less;
- the day specified in the direction that it ceases to be in effect, if specified;
- one year after the direction is given; or
- if the Minister revokes the direction, the time the Minister gives the entity the notice of revocation.
Failure to comply with a direction attracts a civil penalty of 200 penalty units.
9. Transitional provisions
The Bill will include transitional provisions which provide that reporting related amendments in the Bill take effect for reporting periods commencing on or after a fixed transition date of 1 July 2024. Reports with a reporting period start date that occurs on or after this date must be provided under consolidated structures and given in accordance with the revised requirements that apply under the Bill.
However, an entity with a reporting period start date that is within three months after the transition date of 1 July 2024 automatically receives an extension to give that report to a date 12 months from the transition date (ie to 1 July 2025).
Entities that no longer satisfy the definition of reporting entities as a result of the amendments in the Bill cease to have reporting obligations under the scheme once the transitional arrangements end. This cessation of reporting obligations has effect from the beginning of the reporting period of the exiting entity with a start date on or after the transition date of 1 July 2024.
Author: Miriam Kleiner (Partner).
