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 Department of the Treasury, 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, the 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 but with multiple 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 there is a need to report.
• Accounting v taxation income: Prior to 1 July 2024, total income was determined based on income tax definitions but is now 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 under the head reporting entity. Even if revenue under an Australian head entity is small, if total revenue of its global subsidiaries is 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 organisations to produce a "Trade Credit Payments" dataset out of their ERP environments - and a need to produce statistical calculations based on this data. 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 credit" 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 a commercial arrangement results in a need to pay '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 a final calculation until a final "balancing" payment is made.
• Retention contracts: Particularly within the Construction Industry, the "payment clock" for Retentions Contracts is often different from a standard trade credit. If your system records the Invoice Date at the time of an original invoice rather than the retention release trigger, your reported payment times will appear significantly worse than they are in reality.
• Prepayments:  which occur when commercial arrangements necessitate up-front settlement before any benefits are received (such as typical for insurance premiums)

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.

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, particularly in relation to any outstanding submissions under the old rules which existed prior to 1 July 2024.

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 handling of lodgement into the Payment Times Reporting Portal.
• 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 to mitigate reputational risk.

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