Cth Introduces Bill for Mandatory Payment Times Reporting Requirements for Large Businesses

Tuesday 19 May 2020 @ 12.06 p.m. | Corporate & Regulatory | Legal Research

On 13 May 2020, the Payment Times Reporting Bill 2020 (Cth) (‘the Bill’) and the Payment Times Reporting (Consequental Amendments) Bill 2020 (Cth) (‘the Consequential Amendments Bill’) were introduced to the House of Representatives. According to the Explanatory Statement, the purpose of the Bill is to establish a payment times reporting scheme (‘the Scheme’) whereby large businesses and large government enterprises will be required to publicly report on their payment terms and practices for their small business suppliers. Section 3 of the Bill states that the purpose of making this information publicly available is to:

  1. enable small businesses to make more informed decisions about potential customers; and
  2. create incentives for reporting entities to improve their payment terms and practices.

In her Second Reading Speech, the Minister for Industry, Science and Technology, the Hon Karen Andrews, stated that:

“We know that small businesses are the lifeblood of our communities and the backbone of the Australian economy. With the impact of COVID-19 it is even more important that large businesses, as stewards of their supply chains, pay small businesses promptly.”

Who will be considered a ‘reporting entity’?

The Bill defines a reporting entity as a constitutionally covered entity that at the start of the relevant income year was an entity that carried on an enterprise in Australia, is not registered under the Australian Charities and Not-for-profits Commission Act 2012 and, either:

  1. has a total income exceeding $100 million for the most recent income year,
  2. if the entity is a controlling corporation – that the combined total income of all its members exceeds $100 million for the most recent income year or
  3. if the entity is a member of a group of a controlling corporation to which (2) applies – that the total income for the entity is at least $10 million for the most recent income year.

Alternately, an entity can elect to become a reporting entity if they provide notice in writing to the Payment Times Reporting Regulator ('a volunteering entity').

How will the Scheme operate?

If the Bill is passed and receives assent, the Secretary of the Department of Industry, Science, Energy and Resources will designate a position within the Department as the position of Payment Times Reporting Regulator (‘the Regulator’). The Regulator will be required to be a Senior Executive Service employee. The Regulator will be responsible for the administrative matters and functions established under the Scheme and will have statutorily conferred powers to “do all things necessary or convenient to be done for, or in connection with, the performance of the Regulator’s functions”.

Reporting entities will be required to provide reports to the Regulator every six months. The Regulator will publish the reports on a publicly available register known as the Payment Times Reports Register. Reports will be required within three months after the end of a reporting period. However, a reporting entity may request a time extension through a written application to the Regulator with suitable justification and evidence for the necessity of the time extension.

According to the Explanatory Statement, the Scheme will be supported by the development of a “Payment Times Reporting Small Business Identification Tool” to assist reporting entities in identifying small business suppliers. The proposal for the tool is a response to stakeholder feedback concerning the challenges of identifying suppliers that qualify as “small businesses”. The tool will essentially involve software that enables reporting entities to enter identifying information about their suppliers and the tool will correspondingly return a result as to whether the supplier is a “small business”.

Compliance and Enforcement

If granted assent, the Bill further outlines a series of obligations imposed on reporting entities to ensure compliance with the requirements of the Scheme.

Firstly, all reporting entities will be required to keep records of any information used in the preparation of reports for at least 7 years. Furthermore, if a reporting entity fails to maintain to comply with record-keeping requirements and is not a volunteering entity, the reporting entity will be liable to a civil penalty of 200 penalty units.

If a non-volunteering reporting entity fails to provide the Regulator with a payment times report, the entity will be liable to a civil penalty of 60 penalty units for an individual and a maximum of 300 units for a body corporate according to subsection 82(5) of the Regulatory Powers (Standard Provisions) Act 2014 (‘the RPA’). Alternately, if a non-volunteering reporting entity provides a payment times report that contains false or misleading information, the entity will be liable for a civil penalty of 350 units for an individual and a maximum penalty of 0.6 percent of the total income for the relevant income year for a body corporate. If the Regulator is reasonably satisfied that a reporting entity has failed to comply with their reporting obligations, the Regulator may publish the identity of the entity and details of the non-compliance. However, if the Regulator decides to publish details of an entity’s non-compliance, the Regulator must provide the entity with notice in writing with reasons, invite the entity to make written submissions within 28 days of notice and have regard to any submissions within that period.

The Bill also provides the Regulator with the power to require a reporting entity to undergo a compliance audit if the Regulator reasonably suspects that a reporting entity has contravened one of the statutory requirements. The Regulator may, by written notice, require an entity to appoint an auditor who is approved by the Regulator and require the auditor to submit a written report of the results of the compliance audit. The Bill imposes a civil penalty of 60 penalty units if a non-volunteering entity fails to comply with a written notice by the Regulator to appoint an auditor and conduct a compliance audit. Further, a reporting non-volunteering entity is liable to a civil penalty of 200 penalty units where the entity fails to provide the auditor or persons assisting the auditor with “all reasonable facilities and assistance necessary for the effective exercise of the auditor’s duties.” The Regulator will also have powers to monitor compliance, investigate suspected non-compliance, impose infringement notices for breaches, and apply to a court for civil penalty orders against entities according to statutorily conferred powers under the RPA.

Notably, the Bill stipulates that if granted assent, the provisions relating to compliance and enforcement powers will not apply to reporting entities’ obligations for an 18-month period. The Explanatory Statement states that this will provide an appropriate transitory time period for entities to familiarise themselves with the Scheme.

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Payment Times Reporting Bill 2020 (Cth), Payment Times Reporting (Consequental Amendments) Bill 2020 (Cth), second reading speeches, and explanatory memoranda, available from TimeBase's LawOne Service.

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