Payment Times Reporting Scheme - Beyond compliance

The Payment Times Reporting Scheme (PTRS) is a mandatory Australian disclosure framework that requires large businesses and certain government enterprises to publicly disclose their payment practices in relation to small business suppliers every six months.

Administered by the Payment Times Reporting Regulator, the primary goal is to help improve cash flow for small businesses by creating transparency that encourages larger firms to pay faster. For reporting entities, PTRS is a mandatory compliance requirement; failure to comply with the Regulator can result in significant financial penalties.

While the scheme has been in place since 2021, many organisations remain unaware of their ongoing obligations following a significant legislative overhaul in 2024.

KEY PTRS CONSIDERATAIONS

Beyond compliance, the requirement presents a valuable opportunity for businesses to gain deeper insights into payment performance. This is particularly relevant for organisations looking to align their financial operations with Environmental, Social, and Governance (ESG) frameworks and Ethical Payment Strategies.

Here is a breakdown of key considerations to improve your compliance posture:

1. Who must report?

Entities must report if group-level consolidated accounting revenue exceeds $100 million in a previous financial year, even if an organisation makes few payments to Australian suppliers. Key things to look out for include:

• Identification of reporting entity: Reporting must be prepared based on the head Australian entity under consolidated financial reporting definitions. This includes all Registered Foreign Australian Entities (foreign companies carrying on business in Australia). If your group structure involves foreign entities not registered in Australia with different subsidiaries operating within Australia, there may be a requirement to prepare multiple ongoing lodgements within your group.
• Definition of control: Under Australian Accounting Standards (AASB), entities must consider all subsidiaries that would be part of a consolidated financial report based on the concept of control. If you have "de facto" control over an entity, its revenue must be included as part of the threshold to determine whether or not an entity needs to report.
• Accounting v taxation income: Prior to 1 July 2024, total income was determined based on income tax definitions but is defined based on AASB financial accounting principles. If your accounting revenue is significantly higher than your taxable income (common in high-growth or low-margin sectors), you may now have a reporting obligation that didn't previously exist.
• Foreign-sourced income: The $100 million test applies to the entire global consolidated group. Even if an Australian head entity is small, if total revenue of global subsidiaries are significant, there might be an obligation to report.

Insight: Entities should regularly review their group structures (especially during M&A events) for any changes in eligibility. A single acquisition could push a group over the $100M threshold, triggering an immediate need to report.

2. Systems and reporting challenges

The Payment Times Reporting Scheme is predicated on a need for to produce a "Trade Credit Payments" dataset out of their ERP environments - and a need to produce statistical calculations based on this. Whilst the information requirement relies heavily on payments and supplier activities, the rules defining TCP are very specific and hence   there is a need to understand how this can be formulated with data that is captured within your processes and systems.

Key things to look out for include:

• Defining small businesses payments: For each disclosure, vendors and supplier ABNs need to be cross matched with the regulator's Small Business Identification (SBI) tool. This search is available within the Payment Times Reporting Portal.
• Payment exclusions: Your PTRS business process needs to incorporate logic that can filter out "non-trade" payments and any other exclusions detailed in the legislation.  For example:
  • Government Payments: Including Councils and Taxation bodies.
  • Employee Payments: Payroll, superannuation and reimbursements.
  • Non-ABN Suppliers: Foreign entities without a registered Australian Business Number.
  • Pre-payments: Particularly where traditional commercial arrangement results in need for 'up-front' payments (for example insurance premiums).
• Partial payments: Payment times need to be calculated only when an obligation is fully discharged. Partial or progress payments are excluded from the final calculation until the final "balancing" payment is made.
• Retention contracts: In construction and projects, the "payment clock" for retentions is often different from standard trade credit. If your system triggers the clock from the original work invoice rather than the retention release trigger, your reported payment times will appear significantly worse than they are in reality.

Insight: Organisations need to move away from manual processes to produce a reproducible PTRS data pipeline. The Regulator now has the power to notice-to-produce your raw TCP dataset; if your datasets cannot be audited back to your ERP this might increase the risk of reporting penalties being imposed.

3. Reputational stakes

With the primary objective of improving payment performance for small businesses, the Regulator has the authority to both reward exemplary practices and "name and shame" poor performance. These metrics are increasingly viewed through the lens of Ethical Payment Strategies and ESG (Environmental, Social, and Governance) frameworks for modern organisations.

Examples include:

• The "Slow Payer" label: Businesses identified in the slowest 20% of their. This notice must be prominently displayed on the organization’s website and included in all procurement and tender documents.
• The "Fast Payer" list: Conversely, entities that pay 95% or more of their small business invoices within 20 days are recognized on a public "Fast Payers" list, signalling their status as a reliable and ethical partner.

Insight: An entity is automatically protected from being labelled a "Slow Payer" if its 95th percentile payment time is 30 days or less, regardless of its industry ranking. This establishes 30 days as the universal "Gold Standard" for risk mitigation.

4. Compliance catch-up

The Regulator expects entities to be up to date with all prior reporting obligations. Correcting historical failures is essential, as the Regulator has specific expectations regarding:

• Backdated returns: Entities are required to lodge any missed returns from previous periods under the old rules.
• Changes prior to 1 July 2024: Submissions prior to 1 July 2024 must still be lodged under the prior requirements where entities within a group needed ot lodged.  

Consideration:  The Regulator has the authority to impose penalties for non-compliance. It is therefore critical to conduct regular compliance checks and to stay abreast of any legislative changes.

How RSM can help you navigate PTRS

Whether you are establishing a reporting framework for the first time or updating your processes to align with the recent 2024 reforms, RSM provides the technical expertise and practical tools to ensure your reporting is accurate, efficient, and compliant.

How we support you:

• Technical advisory: Determining which entities, subsidiaries and JVs fall within the reporting scope.
• End-to-End lodgement: Managing the preparation of PTRS reports and facilitating secure data transfers.
• Health check reviews: Auditing historical data to ensure all required transactions are captured and "excluded" payments are removed.
• System integration: Embedding reporting requirements directly into your Finance systems for automated, repeatable compliance.
• Data insights & modelling: Using scenario modelling and dashboards to analyse payment performance and mitigate reputational risk.

For more information, please reach out to your Srdjan Dragutinovic or Ben Ingham.