Many corporates may find the reporting requirements challenging for various reasons, including the complex definitional aspects of the legislation.
Australia now has a new payment times reporting (PTR) regime, beginning 1 January 2021.
Both PTR Acts have now passed the Parliament and received Royal Assent.
It is estimated that over 9,000 PTR Reporting Entities (REs) from large business groups would be required to file reports with the new Payment Times Reporting Regulator (Regulator) on a bi-annual basis.
The Acts to implement the PTR regime (Payment Times Reporting Act 2020 and Payment Times Reporting (Consequential Amendments) Act 2020) are expected to be supplemented with final legislative rules, guidance material, as well as a Small Business Identification Tool (SBI Tool) to be released by the new regulator.
A ‘constitutionally covered entity’ becomes a RE at the start of its income tax year if it carries on an enterprise in Australia; satisfies a ‘total income’ threshold for the most recent income tax year; and, is not a registered charity or not for profit. Alternatively, if the constitutionally covered entity gives appropriate notice to the Regulator, it may elect into the regime.
A constitutionally covered entity is intended to cover most entities (both domestic and foreign entities), apart from those that lie outside the constitutional power of the Commonwealth to regulate.
The total income threshold is defined by reference to the concept of total income in the ATO’s tax transparency reporting regime which is basically gross accounting income. A constitutional covered entity meets the criteria if it carries on an enterprise in Australia, and for its most recent income year:
Reporting entities will need to report on a bi-annual basis dependent upon their year-end for tax purposes, they will then have 3 months to upload their report to the Payment Times Reporting Regulator via an online portal.
For most Australian businesses with a 30 June tax year end, they will need to look to its income for the year ended 30 June 2020 to see if it has a PTR obligation and the first reporting window will be from 1 January 2021 to 30 June 2021, with a first reporting deadline of 30 September 2021.
An entity will be identified as a small business in the Payment Times Small Business Identification Tool if it carries on an enterprise in Australia and its annual turnover was less than $10m for the most recent income year. The way we understand the SBI Tool will work is:
The new Scheme will require Reporting Entities to prepare and disclose a wide range of information in relation to their payment practices to those suppliers identified as small business suppliers.
The information will need to be submitted every six months and includes:
Once submitted, this information will then be lodged on a public Payment Times Reporting Register which will make this information readily available for the public to access free of charge.
The newly appointed Payment Times Regulator will have significant powers to monitor, investigate, appoint independent auditors and impose fines including:
We recommend businesses start to prepare early given the 1 January 2021 start date.
In our experience, we expect that many corporates will find the reporting requirements challenging due to:
KPMG has launched a ‘Ready to Report’ diagnostic for clients to highlight risks and areas for improvement in light of these new requirements.
Please contact us for further information.
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