New Payment Times Reporting Scheme - regulations

The Payment Times Reporting Rules 2024 is divided into a number of Parts. Details of each of the Parts is set out as follows.

Preliminary (Part 1):

• This part, along with other introductory information and definitions, provides enhanced meanings for key terms, including “payment term” (Section 7), “payment time” (Section 8), and “trade credit arrangement” (Section 9).
• The Rules outline the method for converting all payment terms into their equivalent maximum calendar days (e.g., 5 business days are converted to 7 calendar days, and 'by the end of the month' is converted to 31 calendar days).
• The Rules specify the method for calculating payment times, which includes considering only the final payment that fully discharges an invoice, notice, or other obligation. Payments made before an invoice or notice are considered to have a payment time of zero days, and recipient-created tax invoices are now explicitly included.
• A trade credit arrangement is defined as an agreement where payment for goods or services can be made at least one calendar day after receipt (i.e. excluding arrangements where payment can only be made at the point of supply or beforehand), regardless of the actual payment date.

Entity information (Part 2):

• Reporting entities and nominees are required to provide the Regulator with 13 pieces of entity information, as outlined in Part 2 of the Rules.
• These 13 pieces of information are also detailed in ATTACHMENT B of the Explanatory Statement to the new Rules.
• Only a small portion of these were required to be reported under the former rules with minor updates (e.g., "business name" and "ABN/ACN/ARBN").
• Entity information will no longer be included in an entity’s payment times report (i.e., regular bi-annual report). Instead, reporting entities and nominees will provide this entity information onto the Portal, and will be required to correct or update the entity information where required (subsection 10(2)).

Payment times reports (Part 3):

• Reporting entities and nominees are now required to report approximately 22 fields on their payment times reports, reduced from 60 fields under the former rules.
• The required fields for payment times reports are also listed in ATTACHMENT B of the Explanatory Statement to the Rules.
• We note that the description of “Percentage of small business procurement made under a trade credit arrangement” set out in ATTACHMENT B appears to be incorrect when compared to subsection 13(1)(a) which states that this is calculated as the proportion of small business trade credit arrangement payments vs total trade credit arrangement payments, whereas ATTACHMENT B states that it is the proportion of small business trade credit arrangement payments vs total small business payments.
• More than half of the required fields are newly introduced in the Rules (e.g., "95th Percentile Payment Time"). The remaining fields contain a number of variations when compared to the former rules. As an example, the reporting of the percentage of the number of small business invoices will change from within 20 days, 21-30 days, 31-60 days, 61-90 days, 91-120 days and more than 120 days, to only 0-30 days, 31-60 days and over 60 days.
• Reporting entities will be expected to follow prescriptive steps to create a “trade credit payments dataset” under subsection 13(4). These steps also specify the payments to be excluded as they are not relevant to the Scheme (such as payments to entities that do not have an ABN). However, these steps do not exclude payments that did not fully discharge the invoices.
  • Given payments to entities that do not have an ABN are excluded from the trade credit payments dataset, the Regulator has confirmed that payments from foreign subsidiaries of reporting entities that do not record an ABN as part of their procurement and payment processes will be excluded from the trade credit payments dataset.
• Subsection 13(5) provides the method to create a small business trade credit payments dataset by removing payments that were not made to small business suppliers from the trade credit payments dataset created under subsection 13(4), using the Payment Times Small Business Identification Tool. This dataset is used to calculate the proportion of trade credit payments relating to small business under subsection 13(1)(a).
• Reporting entities are required to flag payments relating to Peppol enabled invoices within the small business payments dataset (subsection 13(4)) and subsequently within the small business trade credit payments dataset (subsection 13(5)) in order to calculate the proportion of trade credit payments to small business suppliers relating to Peppol enabled invoices under subsection 13(1)(b).
• Section 13 also outlines the reporting requirements for Payment Times Information. The "95th Percentile Payment Time" will be used by the Regulator to determine Slow and Fast small business payers.
  • “95th Percentile Payment Time” is the payment time (expressed as number of calendar days) that is the 95th percentile of all payment times (ordered fastest to slowest) for all payments (that discharged an invoice or obligation in full) included in the small business trade credit payments dataset for the reporting period for the entity (subsection 13(2)(b)).
• Other key new Payment Times Information includes:
  • Average payment time (subsection 13(2)(a))
  • Median payment time (subsection 13(2)(b))
  • 80th percentile payment time (subsection 13(2)(c))
  • Statistical mode of all payment terms (subsection 13(3)(a),(c),(d), although the instrument did not address the situation of multiple or no statistical modes)
  • Most common offered terms longer than statistical mode of payment terms (subsection 13(3)(b))
• Section 14 introduces special reporting content requirements for entities in specific circumstances to improve data relevance and reduce reporting burdens.
• Only a small amount of information needs to be included for certain entities listed below:
  • Entities in external administration
  • Entities that do not make payments to small business suppliers
  • Entities for which another entity is reporting nominee
  • Entities adopting AASB 8 in the preparation of financial reports

Slow small business payers (Part 4):

• Part 4 of the Rules sets out key definitions which support the primary amending legislation in relation to implications for businesses that are slow small business payers. A business which is within the slowest 20% of small business payers across all payers or within their ANZSIC Division for two consecutive periods can be given a direction from the Minister to publish that they are a ‘slow small business payer’ on their website, financial statements and other documentation.
• The meaning of the 95th percentile payment time for a reporting cycle is provided in Section 16 of the Rules, explaining situations where there is one, more than one, or no reporting period for the entity ended within or at the end of the reporting cycle.
• The slowest 20% of small business payers is explained in Section 17 as being those entities whose 95th Percentile Payment Time falls within the slowest 20% as ranked against all reporting entities.
• The slowest 20% of small business payers in an ANZSIC Division is explained in Section 18 as being those entities whose 95th Percentile Payment Time falls within the slowest 20% as ranked against all reporting entities in the same ANZSIC Division.
• The only safe harbour available to prevent an entity from being classified as a slow small business payer is if the entity’s 95th percentile payment time for that reporting period is 30 days or less (Section 19).

Fast small business payers (Part 5):

• Fast small business payers will be publicly listed by the Regulator.
• Part 5 describes that entities will be classified as fast small business payers if their 95th percentile payment time for the reporting period is 20 days or less.

Publication of information on the register (Part 6):

• Part 6 outlines the information that may or must be published on the register.
• It includes a number of determinations made by the Regulator, including that an entity:
  • is a reporting entity
  • is a subsidiary reporting entity
  • is a reporting nominee
  • has ceased to be a reporting entity
  • is an exempt entity; and
  • has been provided additional time to submit a payment times report.