Policy
NCEs must make all payments to suppliers within the maximum payment terms, following the acknowledgement of the satisfactory delivery of goods or services and the receipt of a correctly rendered invoice.
- 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.
- The policy does not require payment by NCEs on invoices that are not correctly rendered and/or where goods and services are not satisfactorily received in accordance with a contract.
- The policy does not require payment by NCEs on disputed amounts. Where an amount is disputed, the NCE may request to make payment after receiving an invoice.
The maximum payment terms are:
- 5 calendar days for electronic invoicing (eInvoicing), where a NCE and a supplier both have the capability to deliver and receive eInvoices 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 a NCE and a supplier.
Where a NCE has not made payment in full within the maximum payment terms, it must calculate interest in accordance with the information under the ‘Calculating Interest’ heading below, and pay that interest to the supplier if the amount accrued is more than A$100.
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.
Limits of the application of this Policy
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This policy does not apply if:
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Practice
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.
Paying and Calculating Interest
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 under Tools and templates in the right hand menu, may assist entities to calculate penalty interest.
Calculating Interest
Interest is payable at the general interest charge rate available from the Australian Taxation Office (ATO), 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.
Interest should be calculated on GST inclusive amounts, however interest itself is not subject to GST.
Example of Calculating Interest for 20 Calendar Day Payment Terms
A 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. Assume the following:
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the relevant daily general interest charge rate is 0.02339726% (current rates are available on the ATO website and are updated quarterly)
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the first day of the payment terms is the calendar day following either the date of acknowledgement of the satisfactory delivery of the goods or services, or the date of receipt of a correctly rendered invoice (whichever is later)
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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 eInvoicing
A NCE makes a payment 20 calendar days after acknowledging the satisfactory delivery of the goods or services and receiving a correctly rendered eInvoice, with maximum payment terms of 5 calendar days. The value of the unpaid amount is $100,000. Assume the following:
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the relevant daily general interest charge rate is 0.02339726% (current rates are available on the ATO website and are updated quarterly)
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the first day of the payment terms is the calendar day following either the date of acknowledgement of the satisfactory delivery of the goods or services, or the date of receipt of a correctly rendered invoice (whichever is later)
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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
Example Draft Contractual Clauses
The following clauses provide an example of clauses which reflect the policy. 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. For example, 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.
Example clause to establish 20-day payment terms and late interest
X. Payment Terms
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.
Y. Interest
Y1. This Clause Y only applies where 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:
SI = UA x GIC x D
Where:
SI = simple interest amount;
UA = the unpaid amount;
GIC = General Interest Charge Rate daily rate; and
D = the number of days from the day after payment was due up to and including the day that payment was made.
Y4. In this clause Y “General Interest Charge Rate” means the general interest charge rate determined under section 8AAD of the Taxation Administration Act 1953 on the day payment is due, expressed as a decimal rate per day.
Z. Correct rendering of invoices
Z1. For the purposes of clauses X and Y, an invoice is correctly rendered if:
- 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).
