Facilitating Supplier Payment Through Payment Card (RMG 416)

Audience

This Guide is relevant to all non-corporate Commonwealth entities (NCEs). It is particularly relevant to Chief Financial Officers (CFOs) and their staff, and officials who are responsible for the NCEs internal controls and processes.

Key points

This Guide:

  • outlines the Government’s policy on payment cards as the preferred method to pay suppliers for eligible payments valued below $10,000; and

  • uses terms as defined in the Commonwealth Procurement Rules.

Resources

This guide is available on the Department of Finance website.

Other relevant publications include:

Part 1 – Policy

  1. NCEs must establish processes that promote payment cards as a preferred option for eligible payments to suppliers valued below $10,000.

  2. NCEs must, to the extent practicable, provide suppliers an opportunity to request payment via a payment card for amounts below $10,000.

  3. NCEs must make payment via a payment card where requested by a supplier for eligible payments. Where practicable, payment should be made at the point of sale. A tax invoice (receipt) must be provided by the supplier for the payment.

  4. 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.

Part 2 – Guidance

  1. The policy facilitates timely payment to suppliers, assists with their cash flow, and reduces the cost to business in supplying to the Commonwealth.

  2. The policy requires NCEs to maintain policies to facilitate the timely payment of suppliers through payment card processes. NCEs may choose to extend this policy to non-eligible payments or payments above $10,000 in line with their business needs.

  3. NCEs are to use payment card processes at the point of sale for amounts below $10,000, in preference to suppliers issuing invoices.

  4. Suppliers may be unaware of the preferred payment option and reasonable efforts should be made to make them aware of the opportunity. This should occur prior to receiving goods or services.

  5. NCEs must pay via a payment card where the:

    • payment is an eligible payment and valued under $10,000 (inclusive of GST and merchant service fees1);

    • supplier can accept and request payment via a payment card; and

    • merchant service fees charged to the NCE are reasonable for the type of card being used and are sufficiently disclosed prior to payment being made.

  1. NCEs should consider paying suppliers via a payment card, but may reasonably seek to pay via an invoicing arrangement when:

    • amounts owed are at, or above, $10,000;

    • paying incremental or milestone payments, irrespective of whether the collective value of the payments is below $10,000;

    • the supplier requests payment via an invoicing arrangement;

    • the supplier seeks payment through non-widely recognised payment cards;

    • paying other Commonwealth entities;

    • paying overseas-based suppliers; or

    • paying third-parties on behalf of the NCE.

  1. NCEs are responsible for ensuring that relevant internal guidance is maintained to give effect to the policy.

Part 3 – Definitions

Business Day means a day that is not a Saturday, Sunday, public holiday or bank holiday in the place where the act is to be performed.

Disputed Amount means any amount issued by a supplier that in the NCE’s opinion, is incorrectly calculated and/or not due for payment.

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. Eligible payments do not include payments due where the NCE has automated invoice payment processes that pay suppliers within five business days of receiving a correctly rendered invoice.

Payment Card means credit, debit cards, charge cards or any other type of Commonwealth issued card, including virtual cards that are authorised to pay suppliers for goods or services received at the point of sale. Examples of widely recognised payment cards include American Express, Diners Club, MasterCard and Visa.

Figure 1: Decision tree on making supplier payments via a payment card

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Footnotes

1 Costs due to the supplier (merchant service fees) may be passed on to the NCE when facilitating payment via a payment card. Merchant service fees are required to be limited to ‘reasonable cost’ for accepting the payment which may vary on the card scheme used. Further guidance on merchant service fees is available from the Reserve Bank of Australia in Guidance Note: Interpretation of the Surcharging Standards (www.rba.gov.au).


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