Via Banking Day:
Large businesses and government enterprises will have to report on payment terms for their small business suppliers, following passage of the Payment Times Reporting Bill 2020 in the Senate last week.
The Payment Times Reporting Scheme will apply to any business or government enterprise with annual income of A$100 million or more. Reporting will be every six months.
Small business suppliers covered by the scheme will be entities with an annual turnover of less than $10 million.
The new law is to take effect from January next year, with the aim of the scheme is to improve payment outcomes for small business.
Reporting will be made public. The government expects that transparency on payment practices will create pressure for change in large companies.
The information memorandum accompanying the bill says long and late payment are a significant problem for small businesses, with more than a third of small business invoices paid after 30 days.
The scheme will be administered by the Payment Times Reporting Regulator, who will publish reports on a register called the Payment Times Reports Register.
A consequential amendment to the Taxation Administration Act enables the Commissioner of Taxation to disclose certain tax information to the Payment Times Reporting Regulator for the purpose of administering the scheme.
The Australian Small Business and Family Enterprise Ombudsman has long campaigned for better small business payment terms. Last year it released the results of a review of supply chain finance, which found that many businesses have a practice of extending payment terms and then offering supply chain finance (early payment at a discount).
“This practice severely impacts small business suppliers and is clearly unacceptable. There is increasing abuse of supply chain finance,” the review said.
The review found there is a lack of contractual transparency in many of these arrangements.
A payment times report will have to include data on the reporting entity’s payment terms and practices, identifying the entities involved. The regulator will have power to monitor compliance, issue infringement notices and apply to a court for penalty orders.
