Supplier Pay on Time or Pay Interest

Status

Use of the model clause is optional but complying with the Supplier Pay On-Time or Pay Interest policy is mandatory for non-corporate Commonwealth entities

Source

Resource Management Guide

Legislation / Policy
Legislation / Policy contact
Additional information
Guidance

For the purpose of this clause, a reference to “correctly rendered invoice” uses the definition contained in Resource Management Guide (RMG) 417 - Supplier Pay On-time or Pay Interest Policy, while a reference to the capitalised “Correctly Rendered Invoice” uses the definition in the CCS Glossary.

Resource Management Guide (RMG) 417 - Supplier Pay On-time or Pay Interest Policy sets out that non-corporate Commonwealth entities (NCEs) must make payment to suppliers within the maximum payment terms, following the receipt of a correctly rendered invoice and acknowledgement of satisfactory delivery of goods or services issued under a contract with an initial value of A$1 million (GST inclusive) or less excluding any options, extensions, renewals or other mechanisms that may be executed over the life of the contract.

Corporate Commonwealth entities (CCEs) are encouraged to apply this policy.

Where the Customer and the Supplier both have the capability to deliver and receive e‑Invoices through the Pan-European Public Procurement On-Line framework (PEPPOL) and have agreed to use electronic invoicing (e-Invoicing), the maximum payment term is five (5) calendar days.  In all other circumstances the maximum payment term are twenty (20) calendar days unless shorter maximum payment terms are agreed between a Customer and a Supplier.

When an NCE has not made payment in full within the maximum payment terms it must pay interest to the Supplier on the outstanding amount, if the amount of interest accrued is more than A$100 (GST inclusive).

If an NCE has a written contract with a Supplier, the contract must include clauses that reflect this policy. Any written approach to market documentation must do the same. 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.

NCEs which use the Commonwealth Contracting Suite (CCS) to contract with Suppliers should note that the CCS automatically embeds a clause to meet the policy in CCS contracts generated by NCE officials.

As this policy is encouraged but not mandatory for Corporate Commonwealth Entities (CCEs), CCE officials using the CCS to contract with Suppliers should include this clause as an additional contract term where the CCE decides to comply with this policy. The CCS does not automatically embed a clause that meets the policy in contracts generated by CCE officials.

Clauses

X.1 Where the Customer and the Supplier both have the capability to deliver and receive e‑Invoices through the Pan-European Public Procurement On-Line (PEPPOL) framework and have agreed to use electronic invoicing (e-Invoicing), the Customer will pay the amount of a Correctly Rendered Invoice to the Supplier within five (5) calendar days after receiving it, or if this day is not a business day, on the next business day.

X.2 Where clause X.1 does not apply, the Customer will pay the amount of a Correctly Rendered Invoice to the Supplier within twenty (20) calendar days after receiving it, or if this day is not a business day, on the next business day.

X.3 If the total value of the Contract is less than A$1 million (GST inclusive) for the initial term only (excluding any options, extensions, renewals or other mechanisms that may be executed over the life of the contract) and the Customer fails to make a payment to the Supplier by the business day it is due, the Customer will pay the unpaid amount plus interest on the unpaid amount, provided the amount of interest payable under this clause exceeds A$100.

X.4 Interest payable under this clause 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 Customer effects payment, calculated using the General Interest Charge Rate available on the Australian Taxation Office website as it appears/applies on the day the amount was due and payable expressed as a daily rate.

Notes

While the Supplier Pay On-time or Pay Interest policy is mandatory for NCEs, use of the model clause is optional. This policy is not mandatory for CCEs but CCEs are encouraged to apply the policy.

Standardisation of contractual text results in efficiencies for both Parties to a contract. Capitalised terms (unless otherwise defined) are based on the definitions in the CCS Glossary.  Definitions of any other defined terms may need to be added. Before deciding whether a particular clause is appropriate, procurement officials should carefully consider the context of their procurement.

Clause wording may need to be changed to align with related clauses in a Contract such as clauses dealing with invoicing and payment. Otherwise, where this clause is included, the clause wording should be used without change.

Terms that are capitalised may need to be changed to align with the Contract terminology.


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