This Bills Digest replaces a preliminary Digest published on 3 June 2024 to assist in early consideration of the Bill.

Purpose of the Bill

The purpose of the Payment Times Reporting Amendment Bill 2020 (the Bill) is to amend the Payment Times Reporting Act 2020 to implement the Government’s response to the Statutory Review of the Payment Times Reporting Act (the Review).

Structure of the Bill

The Bill comprises two Parts. Part 1 contains the relevant amendments to the Payment Times Reporting Act. Part 2 sets out application and transitional provisions.

Background

Problem of late payments

The problems arising from late payment by big business to its suppliers are not new. The Bills Digest for the original Payment Times Reporting Bill 2020 notes that in April 2017, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) issued the final report of its Payment Times and Practices Inquiry. The report identified two issues affecting businesses of all sizes being (p. 4):

• late payment times: getting paid beyond the agreed time in the contract and
• extended payment terms: payment times beyond usual industry standards.

According to the ASBFEO:

Late payments affect cash flow of the business owed the outstanding debt, forcing them to find ways to finance the short fall in their working capital instead of being paid on time and using the cash flow to grow their business. A lack of cash flow is the leading cause of business insolvency and this underscores the importance of the issue of late payments which can easily put many businesses out of operation.

Against the backdrop of late payments, there has been a growing trend in payment practices, particularly amongst large Australian and multinational businesses, to extend payment times. The growth in extended payment times is partly linked to the practices of multinational businesses who apply global policies to improve their working capital efficiency. Extending payment times for suppliers effectively uses the businesses in the supply chain as a cheap form of finance. (pp. 4–5)

Amongst other things, the ASBFEO recommended establishing a National Payment Transparency Register (p. 17) to publish businesses’ payment times and practices rated against a benchmark for good and bad performers.

Payment Times Reporting framework

The Payment Times Reporting Act was enacted in 2020 to provide the legislative framework for the Payment Times Reporting Scheme. Under the Payment Times Reporting Scheme, large businesses and some government enterprises (known as reporting entities) must report every 6 months on their payment times and terms to small businesses.

The Payment Times Reporting Regulator administers the Payment Times Reporting Scheme, to ensure the Payment Times Reports Register is a reliable source of information about how large businesses are paying their small business suppliers.

The Register is based on payment times reports supplied by reporting entities which set out the following information:

• contract payment periods (in calendar days) offered by reporting entities to their small business suppliers
• payment times reported (as percentage of total number of invoices paid)
• payment times reported (as percentage of total value of invoices paid)
• small business procurement (reported as percentage of total value of procurement)
• supply chain finance arrangements
• comments a reporting entity may include in their report about their payment practices.

The Explanatory Memorandum to the 2020 Bill for the Payment Times Reporting Act set out the objective of the Scheme:

[It] is to improve payment outcomes for small businesses by creating transparency around the payment practices of large business entities. By providing access to information on large business payment performance, small businesses will be able to make a more informed decision about their potential customers. Greater transparency on payment practices and performance will also create pressure for cultural change to improve payment times. [emphasis added] (p. 2)

Statutory Review

Section 57A of the Payment Times Reporting Act requires an independent review of the operation of the Act to be conducted within 6 months after the second anniversary of the commencement day—and for the report of the review to be tabled in the Parliament. As the Payment Times Reporting Act commenced on 1 January 2021, the Review commenced at a time that was consistent with the requirements in section 57A.

Subsection 57B(1) of the Payment Times Reporting Act sets out three matters that the review must consider being:

• whether the operation of the Act meets the objects set out in section 3 (discussed below)
• whether related government policies, including policies relating to electronic invoicing, have improved the payment terms and practices of reporting entities and
• whether other measures such as mandating one or more maximum periods for the payment of small business invoices by reporting entities would be more effective in improving those payment terms and practices.

Consultation

On 6 December 2022, Julie Collins, Minister for Small Business, announced an independent review of the Payment Times Reporting Act would be conducted by Dr Craig Emerson. Accordingly, a paper was circulated for public consultation during the period 3 February 2023 to 1 March 2023.

26 submissions were received for this consultation, including 3 confidential submissions. The submission by the ASBFEO indicates that it conducted its own analysis of payment times drawn from the information on the Register which is shown in Table 1 below.

Table 1: Payment Times Reporting Data as at 1 February 2023

ASBFEO, Submission to Statutory Review of the Payment Times Reporting Act 2020, 1 March 2023, 2.

Review Report

The summary in the report of the Statutory review of the Payment Times Reporting Act 2020 (June 2023)(the Review Report) states:

In its current form, the PTRS is a poorly functioning reporting scheme. Unwieldy legislative requirements have compromised the effectiveness of both the PTRS and the Payment Times Reporting Regulator (the Regulator) …

The reporting requirements are onerous for reporting entities and create a confusing, clunky and cluttered dataset. The Payment Times Reports Register (the register) publicly displays 54 reporting fields for each of the more than 35,000 reports, which totals almost 2 million reporting fields across the 4 reporting cycles. Despite this volume of data, the register cannot even reveal a reporting entity’s average payment time to small-business suppliers and how often it pays on time.

Based on the information the register can display, at an aggregate level, the PTRS does not appear to have materially reduced the payment terms or times of large businesses to their small-business suppliers. Since the commencement of the Act, the average payment term – the contractual time in which a large business agrees to pay a small-business supplier – has fallen by less than 2 days, from 37.5 days to 35.8 days. And while the proportion of invoices paid within 30 days has increased slightly, from 62.9 per cent to 67.6 per cent, the proportion of invoices paid in more than 60 days has shown little improvement.

The impenetrability of the data has also limited media coverage and any associated reputational pressure on large businesses to improve their payment performance. The review concludes that the object of the Act – to make payment times information publicly available in order to “create incentives for reporting entities to improve their payment terms and practices” – is a worthwhile goal but has not been met.

Engagement with the PTRS has also been extremely low from small businesses – the very cohort the Act envisaged would use this information. Together, the register and its accompanying dashboard have been accessed less than 20,000 times since the PTRS commenced. Even if a different small business had accessed the register or dashboard each time, this would account for less than 1 per cent of Australia’s 2.5 million small businesses.

Furthermore, the review has received no persuasive evidence that small businesses reject a potential large-business customer because of its payment performance. Inherent power imbalances between large and small businesses prevent small businesses picking and choosing their large-business customers. [emphasis added] (pp. 7–8)

The Review Report makes 14 recommendations for improvement (pp. 15–18), not all of which require legislative amendment.

Government response

The Government responded to the recommendations in the Review Report in December 2023 agreeing with all but one of those recommendations without demur.

The Government agreed in principle to recommendation 6.1—that the position of Regulator of the Payment Times Reporting Act be moved to an established regulator of business activity. In that case, whilst the Government agreed that moving the Regulator as recommended would deliver synergies and leverage relevant expertise, it stated its immediate priority was to make the Scheme more effective and increase pressure on large businesses to improve payment times.

Committee consideration

Senate Selection of Bills Committee

At the time of writing this Bills Digest the Senate Selection of Bills Committee had not referred the Bill to Committee for inquiry and report.

Senate Standing Committee for the Scrutiny of Bills

At the time of writing this Bills Digest, the Senate Standing Committee for the Scrutiny of Bills had not commented on the Bill.

Policy position of non-government parties

Coalition

Deputy Leader of the Opposition, Sussan Ley, stated in the course of the second reading debate that the Coalition would support the Payment Times Reporting Amendment Bill 2024. It would, however, seek to work with all parties in the Senate to propose sensible amendments which better align the commercial incentives that operate within the Bill with the amended objects of the Act. In addition, Ms Ley expressed support by the Coalition for the capture of government agencies by the Scheme.

Independents

Independent MP, Allegra Spender, stated that she recognises ‘what the bill is actually trying to achieve’. However, she also questioned whether the Bill ‘will have the muscle to make the difference in the payment times for small businesses that I believe the Minister would like to make and that I know small businesses critically need’.

Position of major interest groups

The views of stakeholders are set out in the submissions to the Review. 26 submissions were received for this consultation, including 3 confidential submissions. Generally speaking, submitters responded to specific questions that were posed in the Treasury consultation paper. Where relevant to the Bill, views of submitters are canvassed under the heading ‘Key issues and provisions’.

Financial implications

According to the Explanatory Memorandum to the Bill:

The Government is investing a further $25.3 million in the 2024–25 Budget to improve payment times to small businesses, on top of the $8.1 million provided in 2023–24 Mid-Year Economic and Fiscal Outlook. This will ensure the Payment Times Reporting Regulator can deliver its expanded functions, which includes naming slow paying businesses, and funding fit-for-purpose information and communications technology infrastructure. (p. 1)

The financial impact of the Bill is set out in Table 2 below. The figures represent amounts in $m, rounded to the nearest tenth of a million each year.

Table 2: Financial impact of the Bill

Explanatory Memorandum, Payments Times Reporting Amendment Bill 2024, 1.

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[1]

Parliamentary Joint Committee on Human Rights

At the time of writing this Bills Digest, the Parliamentary Joint Committee on Human Rights had not commented on the Bill.

Key issues and provisions

Term of reference a

Treasury, Statutory Review of the Payment Times Reporting Act 2020, terms of reference.

What the Review found

The Review found that object 3(a) of the Payment Times Reporting Act—to provide for large businesses, certain government entities and volunteering entities to report information on their payment terms and practices in relation to their small-business suppliers—has merit but has not been achieved efficiently or effectively: finding 1, p. 11.

In addition, the Review found:

• sub-object 3(b)(i) of the Payment Times Reporting Act—to make information publicly available in order to enable small businesses to make more informed decisions about potential customers—is unrealistic and has not been met. Owing to power imbalances with large businesses, small businesses do not have the luxury of picking and choosing with whom to do business: finding 12, p. 12
• sub-object 3(b)(ii) of the Payment Times Reporting Act—to make information publicly available in order to create incentives for reporting entities to improve their payment terms and practices—has not been met. Without serious reform, the Payment Times Reporting Scheme will not be effective in meeting this sub-object: finding 14, p. 13.

What the Review recommended

The Review recommended amending the objects of the Payment Times Reporting Act to emphasise that the primary purpose of the Payment Times Reporting Scheme is to improve the payment terms, times and practices of large businesses in respect of their small-business suppliers and clarify that the purpose of making the reported information publicly available is to exert reputational pressure on large businesses: recommendation 1, p. 15.

The Review also made extensive findings and recommendations for improving the operation of the Payment Times Reporting Act. Those requiring legislative change are set out below.

Amending the objects

The Bill amends the objects of the Payment Times Reporting Act to better express the purpose of the Payment Times Reporting Scheme.

Item 2 of the Bill repeals and replaces section 3 of the Payment Times Reporting Act. Proposed section 3 outlines clearer objects being:

1. to promote timely payment practices by large businesses, certain government entities and volunteering entities and
2. to foster a culture of prompt payment practices by those entities to:

1. support economic growth and

(ii)  improve outcomes for small business suppliers

3. to encourage those entities to improve their payment terms, times and practices in relation to their small business suppliers
4. to provide for those entities to report on payment terms, times and practices in relation to their small business suppliers and
5. to improve the transparency of the payment terms, times and practices of large businesses.

Amended categories of entities

Reporting entities

Existing section 7 of the Payment Times Reporting Act sets out which constitutionally covered entities[2] are also reporting entities. Subsection 7(2) of the Payment Times Reporting Act is directed toward an entity that carries on an enterprise in Australia, is not registered under the Australian Charities and Not-for-profits Commission Act 2012 (ACNC Act) and to which any of the following applies:

• the total income for the entity for the most recent income year for the entity was more than $100 million
• if the entity is a controlling corporation—the combined total income for all members of the controlling corporation’s group for the most recent income year for the controlling corporation was more than $100 million or
• if the entity is a member of the group of a controlling corporation where the group’s income for the most recent income year was more than $100 million—the total income for the entity for the most recent income year for the entity was at least $10 million.

According to the Review:

Entity-level reporting requirements introduce added complexity for the Regulator from a compliance and enforcement perspective. Understanding company structures requires detailed analysis but there is no public dataset on how income is distributed within every corporate group structure in Australia. Controlling corporations might also regularly redistribute total income among member entities for operational purposes, creating variability in reporting requirements. This makes it more difficult to know with certainty which member entities have an obligation to report under the Act. (p. 28)

Responding to this concern, item 24 of the Bill repeals and replaces section 7 to redefine the meaning of reporting entity. Proposed section 7 achieves this in the following ways:

• it removes the reference to an entity ‘carrying on an enterprise in Australia’ and substitutes a reference to an entity carrying on a business in Australia so that the terminology is consistent with section 21 of the Corporations Act 2001[3]
• a reporting entity will include a company that is not incorporated in Australia, but has either its central management and control in Australia, or its voting power controlled by shareholders who are residents of Australia: proposed subparagraph 7(2)(a)(iii)
• it includes a corporate Commonwealth entity, or a Commonwealth company, within the meaning of the Public Governance, Performance and Accountability Act 2013: proposed subparagraph 7(2)(a)(iv).

The monetary threshold of $100 million is retained. However the current reference to the ‘total income’ of a reporting entity is replaced by a reference to the entity’s consolidated revenue: proposed paragraph 7(2)(b).[4] The reference to an entity that is not registered under the ACNC Act is also retained: proposed paragraph 7(2)(d).

Reporting nominees

The Bill includes measures to allow entities to apply to the Regulator to alter the default reporting arrangements by having a reporting nominee report on their behalf. Item 28 of the Bill introduces, amongst other things, the concept of reporting nominees. A reporting nominee is a constitutionally covered entity that the Regulator has determined, in writing, is a reporting nominee for one or more other entities specified in the determination: proposed subsection 10L(1).[5]

According to the Explanatory Memorandum:

The reporting nominee framework addresses anomalies where it would provide better transparency for an entity other than the reporting entity to report to the Regulator on the reporting entity’s payment terms, times, and practices.

The amendments address situations, for example, where a foreign holding company does not meet the criteria to become a reporting entity for the purposes of the Act, but is a constitutionally covered entity and controls two Australian subsidiaries, one of which is a reporting entity and one is not. Although the Australian subsidiaries are controlled by the foreign holding company, those Australian subsidiaries are not excluded from being a reporting entity because the foreign holding company is not itself a reporting entity. In such a case, the foreign holding entity may apply to the Regulator to become a reporting nominee for the two Australian subsidiaries. If approved, the foreign holding company may then be required by the rules to, for example, give a single, consolidated payment times report for the two Australian subsidiaries for each reporting period. The Australian subsidiary that is a reporting entity continues to give payment times reports, but on a modified basis. (p. 31)

Stakeholder comments

The Business Council of Australia (BCA) noted in its submission to the Treasury consultation:

Many corporate groups will typically use substantially the same systems and processes, and be governed by the same payment policies, for all entities within the group. The requirement to lodge separate reports for each entity makes the PTRS unnecessarily complex and significantly and unnecessarily increases compliance and administration costs. Similarly, the benefits of this approach are unclear where companies have largely aligned payment policies across their business. [emphasis added] (p. 9)

Subsidiary reporting entities

Item 28 of the Bill introduces the concept of a subsidiary reporting entity.[6] Under proposed section 10E a constitutionally covered entity may apply to the Regulator to be a subsidiary reporting entity. The Regulator may make a determination to that effect provided:

• the entity is controlled by another entity (that entity being a reporting entity)
• the Regulator is satisfied that granting the application would not be contrary to the public interest and is consistent with the objects of the Payment Times Reporting Act and
• the Regulator is satisfied of any other matters prescribed by the rules.

According to the Explanatory Memorandum:

These amendments are intended to address anomalies which arise under the reporting entity definition, by providing the Regulator with the power to determine that an entity is a subsidiary reporting entity, when it would not otherwise be a reporting entity.

An example of where such a situation may arise is when a reporting entity is a participant in a joint venture. [Australian Accounting Standards Board] AASB consolidation principles provide that the reporting entity is considered to ‘control’ the joint venture, however in practice the joint venture is jointly controlled and operated under a separate governance structure. The joint venture may apply to the Regulator to be a subsidiary reporting entity and provide its own payment times report, and allow the reporting entity to similarly provide its own payment times report. The Rules may provide that information regarding the joint venture is excluded from this report. (p. 28)

Reporting

By financial year

Currently subsection 8(1) of the Payment Times Reporting Act provides that a reporting period is described in relation to an income year.

Item 12 of the Bill inserts the term financial year into section 5 of the Payment Times Reporting Act so that the language of the Act aligns to a financial year as defined in section 9 of the Corporations Act. The effect of the change is that a reporting entity’s reporting period is the first six months of each entity’s financial year in which the entity is a reporting entity and the remainder of each such financial year. There are some exceptions to this general rule.

Item 27 of the Bill repeals subsections 8(2) and (3) and inserts proposed subsections 8(2)–(5). Proposed subsection 8(2) clarifies that the reporting period for a volunteering entity does not include any part of the financial year in which the entity was not a reporting entity.

Proposed subsection 8(3) provides that the reporting period for a reporting nominee is any period, in a financial year, to which both of the following apply:

• a determination under subsection 10L(1) is in effect for the entity for the whole of the period and
• the period would be a reporting period for the reporting nominee if the reporting nominee were a reporting entity for the whole of the financial year.

Stakeholder comment

The requirement for twice yearly reporting was the subject of concern to some stakeholders. The Australian Banking Association suggested that there was:

… an opportunity to streamline the twice-yearly reporting requirement to an annual report. Doing so will be a more effective approach and will bring this reporting requirement into line with the governments pay on time survey. It would also reduce the regulatory overheads for large businesses operating the scheme. (p. 2)

Similarly, the Business Council of Australia stated:

The review should consider the costs and benefits of moving to annual reporting rather than biannual reporting. If reporting continues to be biannual, allow the principal governing body to approve reports once a year. This would reduce the compliance burden while still ensuring payment terms and practices receive board-level attention to help drive change. (p. 2)

When report must be given

Item 30 of the Bill repeals and replaces sections 12 to 14 of the Payment Times Reporting Act.

Under proposed section 13 a reporting entity must give the Regulator a payment times report within 3 months of the end of a reporting period. The Bill includes different requirements for an application to receive a single extension of 28 days or less as compared to an application for other extensions.

Request for extension of time

According to the Payment Times Regulator (p. 12), for the period 1 July 2023 to 31 December 2023, 309 applications for extension of time were made. The Review notes:

Content requirements for statutory relief applications contained in the Act and Rules lack adequate detail. For example, in seeking an extension of time to submit a report, the Act only requires reporting entities to:

• State the circumstances that have resulted in the need for further time;
• Include evidence of those circumstances; and
• Include any other information prescribed by the Rules.

No other requirements are set out in the Rules, except that the application must be made within the relevant three-month reporting window. (p. 36)

Proposed sections 13A and 13B of the Bill address this issue. Proposed section 13A provides that an entity may make an application for a single extension for a period of 28 days or less only if the period in which the report is required to be given has not ended, and the Regulator has not previously allowed the entity further time to give the report. The application must specify how much time the applicant is seeking and state the circumstances that have resulted in the need for further time.[7]

Proposed section 13B sets out the conditions for the grant of an extension of time for more than 28 days. Such an application may not be made if the applicant has already been given an extension of time under proposed section 13A. The relevant application to the Regulator must state the further period that is sought, state the circumstances that have resulted in the need for the extension of time and include evidence of those circumstances. [8]

What must be reported

Currently section 14 of the Payment Times Reporting Act lists 15 separate matters that are to be reported. Additional requirements are set out in section 9 of the Payment Times Reporting Rules 2020.

According to the Australian Chamber of Commerce and Industry:

… The reporting requirements of the register are very complex and cumbersome for large business, and the repercussions of making an error have considerable financial implications for businesses. Many businesses may not be equipped with a quick and efficient method of collating the information that is required, and may need to implement business improvements to meet their ongoing compliance obligations. (p. 3)

The Review found:

The reporting requirements are onerous and create a confusing, clunky and cluttered dataset that has little utility. The register cannot even reveal a reporting entity’s average payment time to small-business suppliers and how often it pays on time. There is scope to streamline reporting requirements and increase the accuracy and usefulness of the data. (p. 45)

Proposed section 14 consolidates the matters that must be reported by a reporting entity or a reporting nominee so that the relevant material is set out in the Rules: proposed subsection 14(1). In addition, the Rules may do any of the following:

• require the report to include specified information and documents in relation to an entity that the reporting entity controls
• require the report to consolidate information and documents relating to different entities
• prescribe a method for working out any of the matters that must be included in the report and
• require the report to include a declaration that information provided is correct, or was correct at a particular time: proposed subsection 14(2).

Entry and exit from the Scheme

Item 28 of the Bill inserts proposed Part 1A—Provisions about reporting entities and reporting nominees. Part 1A creates clearer and more effective criteria and processes for entry to and exit from the Scheme for reporting entities.

For instance, the Bill provides for an entity to make an application to the Regulator for a determination that it is a volunteering entity: proposed section 10C. In that case, where the Regulator is satisfied that it is not a reporting entity and is not controlled by another entity that is a reporting entity, the Regulator may make a volunteering entity determination which takes effect on the date specified therein: proposed section 10B. The determination is taken to be revoked if the entity becomes a reporting entity: proposed section 10D.

Similarly, proposed sections 10E–10G allow for an application to be made to the Regulator to make a subsidiary reporting entity determination, empower the Regulator to make such determination and to revoke the subsidiary reporting entity determination in certain circumstances. The Bill sets out similar application, determination and revocation procedures for reporting nominees and exempt entities.[9]

Dealing with slow small business payers

Item 41 of the Bill inserts proposed Division 4—Slow small business payers into Part 2 of the Payment Times Reporting Act, comprised of proposed sections 22B to 22H.

Giving a slow small business payer direction

Proposed section 22B empowers the Minister to give a slow business payer direction to a reporting entity or a reporting nominee if:

• the Minister is satisfied that the entity was a slow small business payer in 2 consecutive reporting cycles or
• the Minister is satisfied that the entity was a slow small business payer in a reporting cycle, and the entity did not comply with a requirement to give a payment times report in the preceding reporting cycle or
• the Minister is satisfied that the entity was a slow small business payer in a reporting cycle, and the entity did not comply with a requirement to give a payment times report in the following reporting cycle.

Prior to issuing such a direction to an entity, the Minister is required to give the entity notice in writing of that intention and the reasons for the proposed determination. In addition, the Minister must invite the entity to make written submissions to the Regulator about the proposed decision within the period of 28 days beginning on the day the notice is given: proposed subsection 22B(2). The factors to which the Minister must have regard before a slow small business payer determination is given are listed in proposed subsection 22B(4).

Defining a slow small business payer

Within new Division 4, proposed subsection 22D(1) provides that an entity is a slow small business payer for a reporting cycle if the entity was within:

• the slowest 20% of small business payers for that reporting cycle or
• the slowest 20% of small business payers in a Division of the Australian and New Zealand Standard Industrial Classification for that reporting cycle.

The term ‘slowest 20 per cent of small business payers’ has the meaning prescribed by the Rules: proposed subsection 22D(2).

Importantly an entity is not is a slow small business payer for a reporting cycle if the entity has given the Regulator a payment times report for a reporting period that ended within that reporting cycle and the payment times report has a qualifying payment time of 30 days or less: proposed subsection 22D(4). According to the Explanatory Memorandum:

This reflects that an entity may be in the comparatively slowest 20 per cent of small business payers (overall or in a particular ANZSIC Division) but meets a benchmark of payment times fast enough to not warrant a slow small business payer direction. (p. 45)

What may be included in the direction

Proposed section 22E provides a number of options that are available to the Minister is terms of the contents of a slow small business payer direction.

By way of example, under proposed subsection 22E(1) the direction may require the recipient to publish specified statements or information or to take reasonable steps to cause a constitutionally covered entity that the recipient controls to publish specified statements or information.

In addition, a direction may expressly require publication of the statement or information in any of the following ways:

• on the recipient’s website or the controlled entity’s website
• in documents relating to procurement processes, including requests for quotes and tender documents
• in documents relating to the environmental, social and governance policies or performance of the entity or the controlled entity
• in invoices or other kinds of commercial documents or
• in any other way that the Minister considers appropriate: proposed subsection 22E(3).

A failure to comply with the terms of a slow small business payer direction gives rise to a civil penalty: proposed section 22G.

The Explanatory Memorandum to the Bill makes clear:

… the Minister’s direction making power is discretionary and provides the Government a means to highlight the payment practices of entities subject to the Scheme that are slow small business payers, in order to advance the objects of the Act. (p. 44)

Further, ‘the amendments are not intended to address formal non-compliance with the Scheme by entities, for which the Regulator has oversight'.

Stakeholder comment

While generally supportive of the Bill, according to the Australian Industry Group the ‘new Ministerial powers to designate some reporting entities as ‘slow payers’ is not the right answer. These powers are poorly defined, too discretionary, and don’t fix the actual problem’.

Additional powers of the Regulator

Research and publication functions

The Bill enhances the functions of the Regulator which are currently set out in section 25 of the Payment Times Reporting Act. In addition to the existing functions, item 43 of the Bill inserts proposed paragraphs 25(ba)–(bd) being additional research and publication functions, as well as a function to provide users of the Register with data and tools to assist them with understanding and using the register.

Information gathering powers

The Review states:

… the legislation should be amended to make the Regulator’s powers more proportionate to the regulatory risk being managed and to remove unnecessary and inefficient obligations on the Regulator.

To complement the Regulator’s more extreme information gathering powers – being able to undertake a compliance audit or conduct on-site monitoring or investigation activities – the Regulator should be given the lower-level power to issue a statutory notice to request that a business produce information. This should apply both to known reporting entities and to suspected reporting entities. These entities would be required to provide the information requested, within the period specified, or face a penalty. (p. 63)

Responding to this comment, item 53 of the Bill inserts proposed section 30A into the Payment Times Reporting Act to give the Regulator additional information-gathering powers. According to the Explanatory Memorandum to the Bill (p. 51) the ‘powers are intended to supplement the Regulator’s existing audit, monitoring and investigation powers’.

A person is liable for a civil penalty if the person is given a notice to provide information under proposed subsection 30A(2) and the person fails to comply with the notice: proposed section 30B.

Enforceable undertakings

Item 64 of the Bill inserts proposed section 34A into the Payment Times Reporting Act to establish a framework for accepting and enforcing undertakings relating to non-compliance with an obligation that would attract a civil penalty, by reference to Part 6 of the Regulatory Powers (Standard Provisions) Act 2014.

Term of reference b

Treasury, Statutory Review of the Payment Times Reporting Act 2020, terms of reference.

What the Review found

The Review found that greater uptake of e-Invoicing by all businesses and government agencies would facilitate small businesses getting paid faster and deliver economy-wide productivity benefits, but would not address wilful late payment of invoices: finding 19, p. 14.

What the Review recommended

The Review recommended that there should be an increase in the uptake of e-Invoicing in Australia. To facilitate this the Government should:

• promote the adoption of e-Invoicing by all businesses, including by continuing outreach efforts and considering a communications campaign and
• adopt the full functionality of e-Invoicing across Commonwealth agencies: recommendation 13, p. 18.

The Government agreed with recommendation 13 and the importance of promoting the adoption of e-Invoicing by all businesses—particularly for small businesses where it can enable faster payment times and combat the increasing threat of invoice or payment redirection scams (p. 11).

The Government also committed to develop a strategy to identify the most efficient and effective means to increase the uptake of e-Invoicing by small businesses.

In addition, the Review recommended that Government should explore the feasibility of enshrining the Commonwealth payment times standard into the proposed Supplier Code of Conduct to facilitate prompt payments from all principal contractors to their suppliers: recommendation 14, p. 18.

The Government agreed, noting that existing Government procurement rules require non-corporate Commonwealth entities to make all payments to suppliers within 20 days or pay interest (5 days for e-Invoices), as set out in the Government’s Supplier Pay On-Time or Pay Interest Policy.

As the recommendations relate to policy, legislative amendments are not required.

Term of reference c

Treasury, Statutory Review of the Payment Times Reporting Act 2020, terms of reference.

What the Review found

The Review found that none of the comparable international jurisdictions considered by it has implemented a mandated maximum payment times model that has been enforced effectively. International evidence points to the unintended consequence of fast payers slowing down their payments towards the mandated time.

Mandating maximum payment times to Australian small businesses, including through the proposed Failsafe Mechanism, could be expected to suffer these same flaws.[10] A mandate would disincentivise large businesses from procuring goods and services from small businesses and would damage the viability of industries that necessarily have longer payment times, doing more harm than good for small businesses: finding 16, p. 13.

What the Review recommended

It was the recommendation of the Review that maximum payment times for large businesses in respect of their small-business suppliers not be mandated, given the perverse outcomes for small businesses that could be expected from doing so: recommendation 9, p. 17.

The Government agreed with this recommendation, stating:

Rather than mandating payment times, the Government will ensure small businesses are paid on time by implementing a range of initiatives recommended by the Review that improve payment times reporting, exert pressure on large businesses to improve payment performance and promote payment times as an environmental, social and governance (ESG) obligation of large businesses.

The Government supports reconsideration of whether to mandate maximum payment times in a future review of the Act. (p. 3)

Accordingly, the Bill does not contain such provisions.

Next statutory review

An independent review of the operation of the Payment Times Reporting Act and the Rules must be undertaken within two years of the third anniversary of the commencement of the amendments in this Bill (item 81, proposed section 57A of the Payment Times Reporting Act).

Concluding comments

The Review found (p. 45) that the reporting requirements are onerous for reporting entities and create a confusing, clunky and cluttered dataset. The amendments in proposed section 14 appear, on their face, to consolidate the matters to be reported and will, hopefully reduce the 54 reporting fields which are currently displayed on the Register. However, much will depend on the contents of the Rules relating to those matters.

In addition, it is to be hoped that the amendments in the Bill will allow the Register to more effectively reveal ‘a reporting entity’s average payment time to small-business suppliers and how often it pays on time’ (Review Report p. 7).

However, the greater problem to be addressed is that, at the time the Review was undertaken, the Payment Times Reporting Act ‘does not appear to have materially reduced the payment terms or times of large businesses to their small-business suppliers’ (Review Report p. 7). It remains to be seen whether the amendments in the Bill to allow the giving of a slow small business payer direction will provide sufficient encouragement to large businesses to improve payment times.