Treasury releases much needed guidance on Payment Times Reporting Act

On 22 July 2022, Treasury released 3 draft guidance notes in relation to the Payment Times Reporting Act 2020 (Cwlth).  The guidance is very welcome in a space where no guidance has been forthcoming for two years.  The key points from the draft guidance notes are set out below.  Submissions on the draft guidance notes are due by 2 September 2022.

Do I need to include recipient created invoices in my Payment Times Report?

Guidance Note 1 states that "Where an entity has agreed with a small business supplier it can create a recipient-created tax invoice, the date for calculation of payment times is the date the invoice is issued by the large business customer."  This suggests that despite the legislation and the definition of "small business invoice", an invoice created by the company as a recipient-created tax invoice should still be captured in the company's payment times report.  This will necessitate a change in approach for many reporting entities.

Can I submit a partial report for a newly acquired entity?

Following a merger or acquisition, a reporting entity may:

• submit a report individually, or
• submit as a member or subsidiary entity in the payment times reporting template prepared by the controlling corporation or head entity at the time of submitting the report.

Where an entity has been subject to a merger or acquisition it must still prepare a payment times report for a 6-month reporting period.  Reports should not be submitted for a partial period up to or following a merger or acquisition transaction date.  The table below provides examples of how an entity subject to a merger or acquisition may report.  

What records do I need to keep?

Reporting entities must keep any information used to prepare a payment times report for a period of 7 years from the end of the relevant reporting period.  Types of information a reporting entity may be required to retain include: 

• Final and draft versions of the report.
• Payment records, such as invoices, contracts and bank statements.
• IT system records.
• Report approvals from a responsible member.
• Board papers or meeting minutes demonstrating the report was considered by the principal governing body.
• Calculation sheets and workbooks.
• The SBI Tool output files used to prepare the report.
• Documents recording the methods used to prepare the report.
• Internal or external advice relied on in the preparation of the report.
• Documents, instructions and other correspondence with external parties engaged to prepare the report on the reporting entity’s behalf.

If a reporting entity has other types of records of any information used in the preparation of a report, it must retain those records for a period of 7 years from the end of a reporting period.

Reporting entities may use automated IT functions, customised extracts or other data interpretation processes to prepare a report.  If entities prepare a report using an automated function or secondary information source, they should maintain documentation that describes the process.  For example, include rules, parameters and any reconciliation and validation steps taken to ensure completeness and accuracy of the information.

When will the regulator consider granting an extension for lodgement?

The regulator will only consider granting an extension if it is satisfied the entity is experiencing circumstances that are exceptional or outside its control, resulting in a need for further time.  Circumstances may be considered exceptional if they are uncommon, outside the ordinary, or not regular or routine.  This will generally not apply to:

• foreseeable circumstances that arise in the ordinary course of business, such as staff illness and turnover, or
• the need to obtain third party advice or support to prepare a report.

Circumstances that are one-off or impact an entity as a ‘going concern’ are more likely to be exceptional.  Examples may include a control transaction (such as a change of control in a company) or entering administration under Chapter 5 of the Corporations Act 2001.

Circumstances may be considered to be outside an entity’s control if external factors impact the entity’s ability to report.  Applications should clearly describe the external factors and why they were outside the entity’s management and influence.  The fact that a reporting entity requires or relies on advice or support from a third party would not generally be sufficient to demonstrate a circumstance is outside an entity’s control.

The regulator may assess circumstances as exceptional or outside the entity’s control but not sufficiently severe to need an extension of time.  The severity of circumstances supporting an extension application are assessed on a case-by-case basis.  The regulator will assess the circumstances’ severity based on the impact they have on a reporting entity’s ability to prepare the required report.

Applicants should clearly explain how the circumstances directly, or indirectly, impacted the entity’s ability to lodge a report on time.  Applications should not be limited to general business impacts or inferences on how circumstances affected the business.

Applicants should also consider providing supporting details on how the circumstances have impacted other reporting obligations, such as:

• business activity statement lodgements
• goods and services tax (GST) returns
• financial reporting requirements.

However, evidence of mitigation to limit the impact of circumstances is not required but, the regulator may refuse applications that indicate an indifference or unwillingness of the applicant to take practical steps to meet their obligations.  The regulator will not facilitate conduct by a reporting entity that intends to, or results in, avoiding or delaying reporting obligations.

How long can the extension be and how many extensions can I receive?

The regulator will generally only grant one extension and will usually only grant a maximum extension of 3 months.  Applicants should only request an extension over 3 months where circumstances have a severe impact on their ability to give a report, such as total loss of financial records or the entity entering administration or liquidation.

What if my report contains commercial in confidence information?

The regulator may use redaction powers at the request of a reporting entity where it is demonstrated that the report contains information that is commercial-in-confidence.  Information is commercial-in-confidence if release of the information would cause competitive detriment and the information is not readily discoverable, in the public domain or required to be disclosed under another Australian law. 

To request redaction of information in a report on the grounds it is commercial-in-confidence entities should email the regulator at support@paymenttimes.gov.au at least 7 days prior to lodging their report and provide:

• the entity name, ABN/ACN, reporting period end date and expected lodgement date;
• identification of the information that will be in the report that is considered commercial-in-confidence.  The regulator will not redact reports in full;
• confirmation that the information is not readily discoverable, available in the public domain or required to be disclosed under another Australian law; and
• submissions on how publication of the information would cause competitive detriment.  Submissions should be specific and identify the harm or detriment the entity will suffer from reporting. 

The regulator will not redact information merely on the basis it is unfavourable and may cause detriment when compared to competitors.

The regulator is less likely to redact information on the grounds it is commercial-in-confidence where a request is made after a report has been screened and registered.

The regulator's decision to redact information from payment times reports is discretionary and it may still publish information if it considers, on balance, the benefits of publishing the information outweigh potential detriment that could be suffered by a reporting entity.

Author: Miriam Kleiner (Partner, Legal Governance Advisory)