A ‘reporting entity’ must submit a Payment times report in accordance with the Act.
The reporting requirement applies to constitutionally covered entities (CCE) that carry on an enterprise in Australia and have a total income which exceeds a certain threshold.
A controlling corporation and some or all of the members of the controlling corporation’s group can be ‘reporting entities’.
A constitutionally covered entity (CCE) is:
- a constitutional corporation (a trading or financial corporation formed within the limits of the Commonwealth)
- a foreign entity
- a corporate Commonwealth entity or a Commonwealth company, within the meaning of the Public Governance, Performance and Accountability Act 2013
- an entity, other than a body politic, that carries on an enterprise in a territory
- a body corporate incorporated in a territory taken to be registered in a territory under section 119A of the Corporations Act 2001
CCEs could include private/public companies, trusts, partnerships, joint ventures, sole traders, etc.
Businesses may have a wide array of corporate structures. They should seek professional advice as to whether their particular structure falls under the CCE definition.
A CCE that is a reporting entity will need to report on their payment terms and practices for their small business suppliers.
For example, entities that are a CCE because they carry on an enterprise in a territory need to report on all their business activities in Australia. Note that this is not just on the business activities conducted in a territory in which they operate.
Where an entity is a member of a controlling corporation’s group that have a combined income of more than $100 million in total income and is not constitutionally covered, they will not need to report as part of that group.
Each entity may however be a reporting entity if they are constitutionally covered, carry on an enterprise in Australia, and meet the income threshold of over $100 million in total annual income.
The Australian Constitution defines constitutional corporations as ‘foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth.’ A foreign corporation does not need to be formed within the limits of the Commonwealth or be a trading or financial corporation to be classified as a constitutional corporation.
These constitutional corporations can include publicly listed companies in Australia and may include private companies, incorporated joint ventures, trusts with corporate trustees, etc.
Foreign entities are those that were established outside of Australia and:
- have a place of business in Australia
- employ personnel to work in their business in Australia
- carry on an enterprise in Australia
This would include foreign entities that are subject to income reporting to the Australian Taxation Office.
Entities that carry on an enterprise in a territory
Entities that have a place of business or carry on an enterprise in a territory are a CCE. This may cover partnerships, superannuation funds, sole traders, etc. that operate in a territory.
- Jervis Bay
- an external territory
A place of business in a territory refers to an office or location where business transactions are executed. This includes where its records are stored. For example, places located in a territory, like a:
Carrying on an enterprise in a territory refers to an enterprise carrying on business activities in a territory. For example, the trade of goods or services in a territory that is used to generate income.
Body corporate that is incorporated or registered in a territory
The term body corporate covers any artificial legal entity having a separate legal personality. These entities have perpetual succession. They also have the power to:
- hold property
- enter into legal contracts
- sue and be sued in their own name
These are entities that are a legal entity formed under:
- a territorial jurisdiction
- a legal entity that is registered in a territorial jurisdiction
Corporate Commonwealth entity or company
Refers to a Commonwealth Corporate entity or a Commonwealth company that is a Corporations Act 2001 company that the Commonwealth controls.
State and territory government entities
A state government entity may be a constitutionally covered entity if they are a constitutional corporation. This means they need to be involved either trading or financial activities to a significant extent.
The state government entities most likely to be considered as constitutional corporations are state government business enterprises or partly privatised state entities.
Under the PTRS, government departments in territories are not constitutionally covered entities. Other government entities such as government health services which carry on an enterprise in a territory may be covered.
Local government bodies are not considered constitutionally covered entities for the purposes of the PTRS. However, entities related to local government could still be required to report if they independently meet the eligibility criteria. If the local government body meets the definition of a controlling corporation, related entities may also be required to report where they meet a lower income threshold as shown in the section on group structures.
An incorporated joint venture is a separate corporate legal entity from the joint venturers. It also has its own ABN. It is the incorporated entity that will be the reporting entity. This is provided that it meets the reporting entity requirements.
In some circumstances an unincorporated joint venture (UJV) will itself fall within the definition of a constitutionally covered entity. In this case, it will be required to report on the UJV’s payment practices if it is a reporting entity.
It may also be the case that a participant in a UJV will be a reporting entity in its own right. This includes as a controlling corporation or a member of a controlling corporation’s group. In this case, the reporting entity may need to include information relating to the UJV in its Payment times report.