h small suppliers, which means that customers, suppliers, investors and, more importantly, the media, will have access to your reports.
Identifying who needs to report
By now, more than 4000 large business groups will have received an early invitation to self-register for PTR or will have subsequently gone to the PTR website to investigate registration processes.
However, if you have missed this or think you might have recently met the requirements to report, we have covered the necessary tests to satisfy the PTR regime and report:
A constitutionally covered entity becomes a reporting entity at the start of its income tax year if:
- It carries on an enterprise in Australia
- Satisfies a total income threshold of $100 million for the most recent income tax year
- Is not registered with the Australian Charities and Not‑for‑profits Commission
Alternatively, if an entity gives appropriate notice to the regulator, it may be elected into the regime.
How to identify your small businesses
In December 2020, the government released the Payment Times Small Business Identification Tool, which identifies your small business suppliers. The SBI Tool will identify all Australian small businesses with an annual turnover of less than $10 million for the most recent income year.
If you haven’t yet used the SBI tool, we advise you to upload your supplier data into to identify your small business suppliers as soon as possible.
Payment Times Reporting content
The Act requires reporting entities to prepare and disclose a wide range of information about their payment practices to those suppliers identified as small business suppliers on a bi-annual basis.
From our work with clients to date, we have found this to be much more than just a report, as it will have multiple touch-points across your business, from supplier onboarding right through to your board.
Key information includes:
- The shortest and longest standard supplier payment periods
- The proportion, by total number and value, of small business invoices paid by the entity during the reporting period within certain date ranges
- Whether supply chain finance or early settlement discounts are offered\
The Payment Times Regulator
The newly appointed Payment Times Regulator has significant powers to monitor, investigate, appoint external auditors and impose infringement penalties up to 0.6 per cent of annual income.
While penalties will not come into effect for the first 12 months, the public reporting will commence immediately, and it is this element of the regime that is causing most concern for reporting entities.
Public reporting and the media
The relationship between large retailers and their small suppliers has featured in numerous Australian newspaper headlines in recent years. We saw this increase from May 2020 when the House of Representatives first tabled Payment Times Reporting.
Previously, reporting was presumably based upon information obtained from suppliers. However, once reporting goes live from July 1, we anticipate this to increase significantly as the media receive supplier payment information for free.
This was certainly the case in the UK, where a similar reporting regime was implemented in 2017. Following the first wave of reporting, we saw an increase in media attention with leaderboards generated for easy comparison within sectors and certain reporting entities over time.
Top concerns and issues for retailers
From our work with retail clients, we believe retailers will find the reporting requirements challenging due to:
- Numerous complex definitional aspects of the legislation and rules that have made determining who needs to report difficult for retailing groups
- Supplier data issues
- ERP systems not capturing the relevant data
- Increased workloads for reduced finance teams
- Potential impacts of media scrutiny
With these changes comes the inevitability of impacts further down the line, including how business structure entities manage their data and working capital moving forward.
Through our work with clients, we have found that knowing how to navigate these changes and setting yourself up for success can be complex. We have been supporting clients through the Payment Times reporting to help them understand what’s expected, prepare for the changes and ensure they comply into the future.
Vince Dimasi is Partner and Australian Lead, Working Capital Advisory at KPMG
Natalie Brand is Executive, Working Capital Advisory at KPMG
