At a glance
- Consolidated group reporting now required, with first reports due June 30, 2025.
- Payment times show gradual improvement with 68.9% of invoices paid within 30 days.
- New ‘slow payer’ provisions to identify poorest performers by industry.
The small business landscape remains tough, with insolvency rates hitting a four-year peak in Q4 of 2024 at 25% above pre-pandemic levels. For small businesses already grappling with rising costs and tighter margins, the Payment Times Reporting Act only provided minimal improvements – with invoices paid within 30 days increasing from 63.2% to 68.9%.
For some small businesses, payment delays can tighten cash flow and threaten their survival. Bruce Billson, the Small Business and Family Enterprise Ombudsman, points out payment disputes are his office’s most common complaint.
“Cash flow is the oxygen of enterprise and more than 40% of the cases raised with the ASBFEO Assistance function relate to disputes over payment times,” he says.
The Payment Times Reporting Amendment Act was passed in July 2024 to address these concerns and provide meaningful reform to poor payment practices by large companies.
What has changed?
The amendment shifts to consolidated group reporting, aligning with standard accounting practices while introducing new mechanisms to drive faster payments. The revenue threshold test has also been simplified – groups must now assess their reporting requirements against a $100 million consolidated accounting revenue threshold.
This change brings more businesses into scope, particularly those with foreign subsidiaries or controlled trusts previously outside the regime.
The reforms also offer unprecedented transparency and consequences for failing to meet benchmarks. The slowest 20% of payers in each industry division face ministerial directions requiring them to publicly disclose their status as ‘slow small business payers’ – a designation few boards will welcome.
Conversely, businesses achieving payment times of 20 days or less earn recognition as ‘fast small business payers’ on a public register.
Implementation a challenge
However, implementing these ambitious reforms has proved challenging and Suzanne Westney, Director at McGrathNicol, highlights some operational hurdles.
“Accounting software does not always automatically record or calculate the prescriptive fields required under the new reporting framework,” she says.
“There is a level of analysis needed which can be time consuming for finance teams. Too often, this process highlights the poor quality of data being captured and inefficiencies in internal processes which lead to inaccurate reporting or poor results.”
The complexity of transitioning to consolidated reporting prompted the Payment Times Reporting Regulator to grant a three-month extension for the first reports under the new regime, moving the deadline to June 30 2025.
While this aligns with the financial year-end reporting cycles, small businesses face further delays to reforms meant to improve payment times.
The small business community remains circumspect about the amendment’s effectiveness in its current form.
Billson says the scheme has not yet driven any real improvements in big businesses being more timely in paying their small business suppliers.
Barriers to improvement
While Billson acknowledges the work undertaken by the Federal Government to review, further develop and improve payment times reporting rules, he highlights more fundamental issues threatening the scheme’s effectiveness.
“The Payment Times Reports Register dashboard remains too complex and opaque and time-poor, resource-constrained small business owners have no ready way of finding a large business’ payment-time performance at a glance,” he says.
This accessibility barrier compounds deeper structural problems.
“Defining fast small business payers as those paying in 20 days or less entrenches the acceptability of 20-day payment times and reduces incentives for large businesses to exceed this level of payment performance,” Billson says.
“Cash flow is the oxygen of enterprise and more than 40% of the cases raised with the ASBFEO Assistance function relate to disputes over payment times.”
Bruce Billson, Small Business and Family Enterprise Ombudsman
“Payment times for businesses are not aligned with small businesses who often need to adhere to faster payment times than their larger counterparts.
“This misalignment in payment time requirements and incentives for small and large business can result in smaller businesses carrying a disproportionate share of the supply chain risk.”
Lessons from other jurisdictions
Could the UK system offer a better way forward? Billson thinks so, pointing to its success in making prompt payment a cornerstone of corporate reputation and ESG credentials.
“Such a campaign could amplify and empower the regulator’s reporting, including its new role of highlighting the best and worst payment performers,” he says.
The UK approach has shown that when payment practices affect corporate reputation, real change follows. In Australia, the first consolidated reporting deadline in June will reveal how ready large companies are to embrace a new payment culture.
Learn more about IPA’s advocacy on payment times for small business here.
