Supplementary Explanatory Memorandum
(Circulated by authority of the Minister for Employment, Skills, Small and Family Business, Senator the Hon Michaelia Cash)NOTES ON GOVERNMENT AMENDMENTS
(1) Clause 5, page 3 (after line 14), before the definition of Australia , insert:
This amendment inserts a new definition of ABN, short for Australian Business Number, which has the same meaning as ABN in the A New Tax System (Australian Business Number) Act 1999.
A definition of ABN is included as reporting entities will be required to state their ABN, where the entity has an ABN, as part of their Payment Times Report. This is a consequential change as a result of the amendments made in relation to Item 6.
(2) Clause 5, page 3 (after line 20), after the definition of authorised officer , insert:
This amendment inserts a new definition of Business Industry Codes which means the codes in force or existing from time to time as published by the Australian Taxation Office (ATO). The Business Industry Codes are publicly available and free of charge on the ATO's website.
A definition of Business Industry Codes is included as reporting entities will be required to include a description of their main business activity in accordance with these codes as part of their Payment Times Report. This is a consequential change as a result of the amendments made in relation to Item 6.
(3) Clause 5, page 3 (after line 24), after the definition of civil penalty provision , insert:
This amendment inserts a new definition of commencement day meaning the day this Act commences.
(4) Clause 5, page 5 (after line 25), after the definition of payment times report , insert:
This amendment inserts a new definition of Payment Times Small Business Identification Tool. The meaning of the Payment Times Small Business Identification Tool (Tool) will be prescribed by the Rules.
This definition is a consequential change as a result of the amendments made in relation to Item 5.
(5) Clause 5, page 7 (line 2), omit the definition of small business , substitute:
The previous definition of small business, meaning an entity prescribed by the Rules, has been omitted and substituted with a new definition. This new definition makes clear that a small business means an entity described as a small business in the Tool.
To provide greater certainty about the scope of entities covered by this definition, a new legislative note to the definition outlines that an entity is described as a small business in the Tool where it carries on an enterprise in Australia and its annual turnover was less than $10 million for the most recent income year.
Annual turnover is taken to be interpreted within the meaning of the Income Tax Assessment Act 1997.
Moving the definition of small business from the draft Rules to the Act responds to concerns raised by the Senate Standing Committee for the Scrutiny of Bills and other stakeholders that certain concepts central to the Scheme should be moved to the primary legislation.
(6) Clause 14, page 13 (lines 4 to 30), omit subclause (1), substitute:
Subsection 14(1) describes the content required to be included in a Payment Times Report. This amendment moves some of the content requirements from the draft Rules to subsection 14(1) of the Bill, and includes additional information on payment periods of more than 60 days.
Content requirements that have been moved from the draft Rules to subsection 14(1) of the Bill includes certain identifying information such as the entity's name, and where applicable its ABN, as well as a description of its main business activity in line with the ATO's Business Industry Codes.
Information on standard payment periods has been moved to subsection 14(1) requiring a report to include a statement on the standard payment periods, including the shortest and longest standard payment periods, as well the details and explanation of any changes to these periods.
The report should also state the proportion of small business invoices paid by the entity between certain ranges of time, including invoices paid within 20 days after the day the small business invoice was issued, between 21 and 30 days, between 31 and 60 days, between 61 and 90 days, between 91 and 120 days and invoices paid more than 120 days.
The inclusion of additional ranges of time beyond 60 days is intended to provide improved transparency of payments beyond this period and provide small business suppliers with greater visibility of the payment practices of their large business customers where these payments extend beyond 60 days.
Information on the total value of all procurement by the entity during the reporting period that was procured from small business suppliers has also been moved to subsection 14(1).
Other material moved from the draft Rules include certain administrative details such as the name of the responsible member who signed the report under subsection 14(5) and the name and contact details of the individual submitting the report to the Regulator.
(7) Clause 14, page 13 (line 32), omit "paragraph (1)(d)", substitute "paragraph (1)(g)"
This amendment omits the reference to paragraph (1)(d) and substitutes paragraph (1)(g). This is a consequential change as a result of the amendment at Item 6 and provides that the Rules may prescribe how certain contents of a Payment Times Report, such as the proportion of small business invoices paid within a certain period, are calculated.
(8) Clause 14, page 14 (line 1), omit "paragraph (1)(i)", substitute "paragraph (1)(o)"
This amendment omits the reference to paragraph (1)(i) and substitutes paragraph (1)(o). This is a consequential change as a result of the amendment at Item 6 and provides that information or documents prescribed by the Rules may relate to the reporting entity's payment terms, including supply chain finance arrangements, to small business suppliers.
(9) Clause 14, page 14 (after line 20), at the end of the clause, add:
This amendment inserts new subsections 14(6) and 14(7) prescribing the form and manner for giving a Payment Times Report.
New subsection 14(6) requires that, if a form and manner has been approved in an instrument under subsection 14(7), a Payment Times Report is to be provided in that approved way.
New subsection 14(7) provides that the Payment Times Regulator may approve the form or manner for providing a report. This approval will be made by notifiable instrument and published on the Federal Register of Legislation.
The intention of this change is to require reporting entities to provide their reports in a common reporting template approved by the Payment Times Regulator. This is a technical amendment to improve the administrative efficiency of the Scheme given the number of reporting entities that will be required to report to the Payment Times Regulator on a bi-annual basis.
(10) Clause 27, page 21 (after line 19), after paragraph (3)(b), insert:
Section 27 sets out the delegations by the Payment Times Regulator under the Act. Subsection 27(3) provides that the Regulator may only delegate its functions or powers for certain provisions to an SES employee, or acting SES employee.
This amendment inserts a new paragraph providing that the power under new subsection 14(7) that prescribes the form and manner for giving a Payment Times Report by notifiable instrument, is only delegable to an SES employee, or acting SES employee.
(11) Clause 28, page 22 (line 17), omit "18 months", substitute "12 months"
This amendment changes the simplified outline to Part 4, Compliance and Enforcement, to specify that the application of compliance and enforcement powers under this Act is delayed by 12 months.
This is a consequential change as a result of the amendment made in Item 12.
(12) Clause 37, page 33 (line 6), omit "18 months", substitute "12 months"
Section 37 sets out the period where compliance and enforcement powers will not apply to the obligations in the Act. This amendment outlines that the enforcement day, that is where compliance and enforcement provisions will start to apply, is the day occurring 12 months after the commencement of the Act.
(13) Clause 47, page 38 (lines 4 to 6), omit the paragraph beginning "This Part deals", substitute:
This amendment changes the simplified outline to Part 6, Miscellaneous, to outline that Part 6 deals with a range of miscellaneous matters, including a statutory review. This is a consequential change as a result of the amendment made in Item 16.
(14) Clause 47, page 38 (after line 8), after the paragraph beginning "This Part also provides", insert:
This amendment includes a new paragraph in the simplified outline to Part 6, Miscellaneous, to outline that Part 6 deals with the commencement day for reporting entities and for entities who voluntarily elect to become reporting entities. This is a consequential change as a result of the amendments made in Item 15.
(15) Page 45 (after line 1), before clause 55, insert:
This amendment inserts new sections 54A and 54B in relation to the commencement day for reporting entities and for entities that volunteer to report. The amendment brings forward the reporting cycle for a number of reporting entities to reflect the intent that entities commence reporting as soon as reasonably practicable after the Scheme starts. If the Scheme starts on 1 January 2021, the first reporting periods will be as follows:
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- reporting entities with standard and calendar income years - 1 January 2021 to 30 June 2021.
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- reporting entities with income years starting in the first half of 2021 - their first reporting period will start with the start of their income year. For example, reporting entities with an income year starting on 1 April 2021 will start their first reporting period on this date and it will run to 30 September 2021.
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- reporting entities with income years beginning in the second half of 2021 - their first reporting period will begin half way through their income year. For example, if the income year for a reporting entity begins on 1 November 2021, their first reporting period will start on 1 May 2021.
The amendment also provides additional time for entities that elect to become a reporting entity to elect to become a reporting entity at the beginning of the Scheme.
(16) Page 46 (after line 9), after clause 57, insert:
This amendment inserts new section 57A requiring an independent review of the operation of the Act, including the Rules. The review is to be undertaken within six months, following 24 months of the Act's commencement, with a written report to be provided to the Minister. This provision also sets out when a copy of the review's report is to be tabled in each House of the Parliament.
An independent review is intended to assess whether the provisions of the Act, including the Rules, are operating as intended.
(17) Clause 58, page 46 (line 27), omit " small business ", substitute " Payment Times Small Business Identification Tool "
This amendment omits the reference to 'small business' in subsection 58(3) and substitutes 'Payment Times Small Business Identification Tool'. This is a consequential change as a result of the amendment made in Item 4.