Effective 26 May 2024, large businesses will be required to publicly disclose their payment terms and how long they take to pay their bills. For small businesses, late payments and lengthy payment terms can have a negative impact on cash flow. With more certainty on business-to-business payment practices, small businesses can make informed choices about whether to engage with certain large entities.
Who will this new regime apply to?
Under the new Business Payment Practices Act 2023, ’large’ businesses will be required to disclose certain information about their payment practices.
This will generally impact entities for which in each of the two preceding accounting periods:
- Total assets of the entity and its subsidiaries exceeded $66 million, or the total revenue of the entity and its subsidiaries exceeded $33 million, and
- Its total expenditure (excluding wages, salaries and goods and services supplied by related parties) was equal to or greater than $10 million.
The new system will be rolled out to the largest organisations first – those with $100 million revenue turnover.
What will need to be disclosed?
Large entities will need to make disclosures on certain business-to-business payment practices every six months to a government-appointed Business Payment Practices Register. This information will be publicly available.
Relevant entities will be required to disclose information on:
- Invoices received or paid in full or in part by the entity or its subsidiary during the reporting period. For example, this will cover information about the proportion of invoices paid in full and the time taken to pay invoices, and
- Invoices issued by the entity or its subsidiary during that period, and
- Any other information required about the entity’s payment practices during that period.
If an invoice allows payment by instalments on certain dates, each instalment will be treated as a separate invoice.
However, information won’t be required for invoices or payments for salary or wages to an employee or office holders; income tax, goods and services tax, or any other form of tax; rent or a lease, and/or charges for utilities and local body rates.
Entities will also be required to disclose identifying information, including their legal and trading names, registered addresses, their NZBN and industry classification.
A director or person occupying an authorised position will be required to sign off the disclosure to confirm the information is compliant and accurate.
Payment practices information will be removed from the register after seven years from the disclosure date. However, any information that relates to an individual may be omitted or removed if the Registrar considers that public access to that information would be likely to prejudice their privacy or personal safety.
What are the consequences of non-compliance?
A compliance notice may be issued if a business fails to comply with the disclosure obligations. Failure to comply or providing false or misleading information may see the business liable for infringement fees and penalties. Penalties of up to $50,000 can be handed down to an individual and up to $500,000 for an entity.
If you have any questions about the new business-to-business payment disclosures or need assistance with the design of the disclosure requirements or registering with the Register, please contact one of our advisors. We are here to help.