Source: https://www.finance.gov.au/publications/resource-management-guides/supplier-pay-time-or-pay-interest-policy-rmg-417
Timestamp: 2020-01-23 16:33:04
Document Index: 160036779

Matched Legal Cases: ['art 1', 'art 1', 'art 1', 'art 2', 'art 3', 'art 2']

The policy came into effect 1 January 2020, introducing five day payment terms where Pan‑European Public Procurement On-Line (PEPPOL) compliant e-Invoicing capability exists. RMG 416 (dated November 2016) - Facilitating Supplier Payment Through Payment Card has also been merged into RMG 417, resulting in all supplier payment arrangements now found in the one guide.
The Department of Employment, Skills, Small and Family Business conduct a mandatory annual survey of payment times for non-corporate Commonwealth entities, the Pay on-time survey performance report, collecting information about their performance against the policy. For information on the survey, see the Department of Employment, Skills, Small and Family Business’ website.
replaces RMG 417 (dated July 2019): Supplier Pay On-Time or Pay Interest Policy;
replaces RMG 416 (dated November 2016): Facilitating Supplier Payment Through Payment Card;
outlines the Government’s policy on payment timeframes for invoices arising from procurement contracts to non-government individuals and entities; and
This guide is available on the Department of Finance website at www.finance.gov.au.
Additional Information on this policy: https://www.finance.gov.au/publications/resource-management-guides-rmgs/supplier-pay-time-or-pay-interest-policy-rmg-417/pay-time-policy-rmg-417-additional-information
Online Interest Calculator:
https://www.finance.gov.au/publications/information-sheet/interest-calculator
Commonwealth Procurement Rules: https://www.finance.gov.au/government/procurement/commonwealth-procurement-rules
General Interest Charge (GIC) Rates:
https://www.ato.gov.au/Rates/General-interest-charge-(GIC)-rates/
Additional Information on electronic invoicing (e‑Invoicing):
1. This policy facilitates timely payment to suppliers, assists with their cash flow, and reduces the cost of supplying to the Commonwealth.
2. As a general principle, NCEs are encouraged to implement efficient and timely receipting and payment practices to ensure that supplier payments are made as quickly as possible.
Part 1.1 – Policy for payments under contracts up to $1 million
NCEs must make all payments to a supplier under a contract valued up to A$1 million (GST inclusive) within the maximum payment terms, following the acknowledgement of the satisfactory delivery of goods or services and the receipt of a correctly rendered invoice.
The maximum payment terms are:
5 calendar days for electronic invoicing (e-Invoicing), where an NCE and a supplier both have the capability to deliver and receive e‑Invoices through the Pan-European Public Procurement On-Line framework and have agreed to use this method of invoicing; or
20 calendar days for all other invoices, unless shorter maximum payment terms are agreed between an NCE and a supplier.
When an NCE has not made payment in full within the maximum payment terms, it must calculate interest in accordance with paragraphs 14 and 15 below, and pay that interest to the supplier if the amount accrued is more than A$100 (GST inclusive).
NCEs must ensure that any written approach to market documentation or written contract with a supplier includes clauses that reflect this policy. However, this policy still applies even if a written contract or approach to market fails to include clauses that reflect this policy, or if no written contract exists between the NCE and the supplier.
procuring real property, including leases and licences;
the nature of the goods or services being procured, or the structure of the procurement, would make it impractical for the policy to be applied, such as where the procurement occurs under standard terms and conditions put forward by the supplier rather than the NCE;
the payment arises from a non-procurement arrangement, such as a grant.
Part 1.2 – Guidance for payments under contracts up to $1 million
Once the NCE has acknowledged the satisfactory delivery of the goods or services and a correctly rendered invoice has been received, the maximum payment terms apply from the start of the next calendar day.
When determining the value of the contract for the purposes of this policy, NCEs should take into account the value of the initial term of the contract (GST inclusive) – not including any options, extensions, renewals or other mechanisms that may be executed over the life of the contract.
If the value of the contract is not known, it should be assumed for the purposes of this policy that the contract is valued at $1 million (GST inclusive) or less, unless it is reasonable to assume otherwise.
The policy applies to work/official orders entered into that are valued up to $1 million (GST inclusive) under standing offer (panel) arrangements.
When interest is payable, NCEs should make a self-generated interest payment to the supplier for any outstanding simple interest accrued. An online calculator, available on the Department of Finance’s website, may assist entities to calculate penalty interest.
NCEs may agree to pay interest in other circumstances, for example, in contracts above $1 million.
Interest is payable at the general interest charge rate available on the ATO’s website, calculated for each calendar day from the day after payment was due up to and including the day that payment was made. If the maximum payment terms fall on a non-business day, payment is not due until the next business day.
Example of Calculating Interest for 20 Calendar Day Payment Terms
An NCE makes a payment 33 calendar days after acknowledging satisfactory delivery of the goods or services and receiving a correctly rendered invoice, with maximum payment terms of 20 calendar days. The value of the unpaid amount is $100,000 and the total contract was valued at $1 million (GST inclusive) or less. Assume the following:
the relevant daily general interest charge rate is 0.02339726% (current rates are available on the ATO website and are updated quarterly)
the first day of the payment terms is the calendar day following either the date of acknowledgement of the delivery of the goods or services, or the date of receipt of a correctly rendered invoice (whichever is later); and
payment occurs 13 calendar days after the conclusion of the 20 calendar day payment period specified in the written contract. The date of conclusion of the payment period is the day that the payment was made by the NCE.
Interest paid = $100,000 x (0.02339726 / 100) x 13
= $304.16
Example of Calculating Interest for 5 Calendar Day Payment Terms for e-Invoicing
An NCE makes a payment 20 calendar days after acknowledging the satisfactory delivery of the goods or services and receiving a correctly rendered e-Invoice, with maximum payment terms of 5 calendar days. The value of the unpaid amount is $100,000 and the total contract was valued at $1 million (GST inclusive) or less. Assume the following:
the relevant daily general interest charge rate is 0.02339726% (current rates are available on the ATO website and are updated quarterly);
the first day of the payment terms is the calendar day following either the date of acknowledgement of the delivery of the goods and services, or the date of receipt of a correctly rendered invoice (whichever is later); and
payment occurs 15 calendar days after the conclusion of the 5 calendar day payment period specified in the written contract. The date of conclusion of the payment period is the day that the payment was made by the NCE.
Interest paid = $100,000 x (0.02339726 / 100) x 15
= $350.96
Part 1.3 – Example Draft Contractual Clauses
The following clauses provide an example of clauses which reflect the policy and may be appropriate to include in relevant contracts valued up to A$1million (GST inclusive). These clauses are examples only and entities may draft their own clauses to implement this policy. If entities use the model clauses, care should be taken to ensure that they are correctly adapted to the relevant contract – e.g. by ensuring they are consistent with the language used in the contract and do not conflict with other clauses and definitions elsewhere in the contract.
X1. The non-corporate Commonwealth entity will pay the Supplier within 20 days after acknowledgement of the satisfactory delivery of the goods or services and receipt of a Correctly Rendered Invoice. If this period ends on a day that is not a Business Day, payment is due on the next Business Day.
the value of this Contract is A$1 million (GST inclusive) or less; and
the amount of the interest payable exceeds A$100.
Y2. For payments made by the non-corporate Commonwealth entity after the payment is due, the non-corporate Commonwealth entity pays the unpaid amount plus interest on the unpaid amount.
Y3. Interest payable under this clause Y will be simple interest calculated in respect of each calendar day from the day after the amount was due and payable, up to and including the day that the non-corporate Commonwealth entity effects payment as represented by the following formula:
it is correctly addressed and calculated in accordance with the Contract; and
it relates only to supplies that have been delivered to the non-corporate Commonwealth entity in accordance with the Contract; and
it is a valid tax invoice in accordance with A New Tax System (Goods and Services Tax) Act 1999 (Cth).
Part 2.1 – Policy for payments for goods and services below $10,000
This part refers to payments for purchases of goods and services with a total value below $10,000. It does not apply to part payments made or invoices issued under contracts with a total value over $10,000. For further information, see the definition of eligible payment in Part 3 below.
Part 2.2 – Guidance for payments for goods and services below $10,000
the supplier can accept and request payment via a payment card; and
Acknowledgement of the satisfactory delivery of the goods or services means that the NCE has confirmed that the goods or services have been delivered in accordance with the terms of the contract.
Business Day means a day that is not a Saturday, Sunday, a public holiday or bank holiday in the place where the act is to be performed.
Correctly Rendered Invoicemeans an invoice which is:
for amounts that are correctly calculated and due for payment and payable under the terms of the written contract.
Eligible Payment means a payment with a value less than $10,000 (inclusive of GST and merchant service fees) due to a supplier that is not associated with a multiple-payment contract, or standing offer arrangement. Eligible payments may include payments made as a result of purchase orders.
Receipt means the day that the correctly rendered invoice is received by the NCE.
RMG417 supplier pay on time or pay interest policy [167.3 KB]
RMG417 supplier pay on time or pay interest policy [278.6 KB]