A significant new statutory duty for large businesses came into force on 1 January 2021.
The Payment Times Reporting Act 2020 (Cth) (The Act) requires large businesses in Australia to report their payment terms and practices in relation to their small business suppliers every 6 months.
The payment times reporting regulator will keep the reports on a publically available register (The Payment Times Reports Register) with the view of enabling small businesses to make more informed decisions about who they do business with and incentivising large businesses to improve their payment terms and practices.
Who do the new laws apply to?
The Act applies to all businesses in Australia with an annual turnover greater than $100 million. Other entities may elect to report voluntarily.
When do the new laws commence?
Reporting entities will be required to submit their first payment times report within 3 months from the end of their first full reporting period that occurs after 1 January 2021. For most large businesses, this means a payment times report will need to be lodged within 3 months of 30 June 2021.
Compliance & enforcement
The Act is largely enforced by the Payment Times Reporting Regulator (the Regulator) who has broad audit, monitoring, and investigation powers to prosecute non-compliance. The Regulator has the power to publish the identity of any reporting entity who fails to comply with the Act and any details of the non-compliance. If the Regulator reasonably suspects a reporting entity has contravened the Act, the Regulator may by written notice require the entity to appoint an auditor to audit compliance with the Act and provide a report of the auditor’s findings to the Regulator at the expense of the entity. Civil penalties will apply for non-compliance. These include:
|Failure to report to the Regulator.||$13,320|
|Failure to comply with an audit notice issued by the Regulator.||$13,320|
|Failure to keep records of any information used in preparing a report for at least 7 years.||$44,400 or 0.2% of the entity’s total income in the relevant income year.|
|Failure to provide the appointed auditor with all reasonable facilities and assistance necessary for the auditor’s duties.||$44,400 or 0.2% of the entity’s total income in the relevant income year.|
|Providing false or misleading information to the Regulator.||$44,400 or 0.2% of the entity’s total income in the relevant income year.|
The compliance and enforcement powers under this Act will be subject to a 12-month penalty-free period. Civil penalties provided in this table will not be enforceable until 1 January 2022.
Are there any limitations?
The Regulator may decide not to publish certain information from a payment times report if the Regulator considers that making that information publically available would be contrary to the public interest. The Regulator may decide not to publish payment times reports for volunteering entities who fail to comply with the Act until remedial action is taken by the entity.
So, what does this mean if you’re a large business?
- Reporting entities must ensure the integrity of the data from their accounting systems to ensure compliance.
- Reporting entities may have to develop a new business process for reporting to be prepared for the new laws.
- The payment terms and practices of large businesses will be available for public scrutiny, so it will be important to review and audit your payment practices and systems.
- The regime will be an opportunity for compliant reporting entities to highlight positive payment terms and practices to improve brand and reputation.
The new obligations are likely to have a significant financial and administrative impact on large businesses that are required to report their payment terms and practices under the new legislation. It is critical that any large business starts taking steps to comply with the regime ahead of the first reporting period.
Reporting entities will be required to keep records of the information used to prepare a payment times report for at least 7 years after the report is submitted. Accordingly, reporting entities should develop and implement new compliance programs to ensure administrative processes are compliant with the new legislation to avoid public scrutiny and civil penalties.
Large businesses should also consider how their payment terms and practices are likely to be compared and possibly criticised with the payment terms and practices of industry competitors when published on the public register.
If you have any questions about the new laws or want assistance in ensuring your business is compliant with this new regime, reach out to our commercial and corporate law team leaders, Jaclyn Fenby at J.firstname.lastname@example.org and Sally Bates at email@example.com, contact us via the links below, or use the chat feature below to speak to one of our team members now.
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