PayID has become a familiar way for Australians to send and receive money without needing to remember a BSB and account number.
For businesses, however, PayID is more than just a convenient payment option. Understanding how it worksâand how to manage payments securelyâcan help reduce payment errors, improve reconciliation and protect against scams.
How does PayID work?
PayID allows a bank account to be linked to an identifier such as a mobile number, email address or ABN.
Instead of providing traditional bank details, a business can provide its PayID to a customer. When the customer enters the PayID through their banking app, the name associated with the PayID is generally displayed before the payment is confirmed.
PayID operates through Australia’s New Payments Platform (NPP), which enables participating financial institutions to process fast payments.
For many transactions, the money can arrive almost immediately, although banks may sometimes delay payments for security checks.
Why is PayID useful for businesses?
For businesses that regularly receive payments, PayID can make the payment process simpler.
It can:
- reduce the need to provide BSB and account numbers;
- make payment details easier for customers to remember;
- help reduce some data-entry errors; and
- support faster receipt of payments.
Some businesses may also use PayID arrangements to help identify and reconcile incoming payments, depending on the services provided by their bank or payment provider.
However, businesses should still maintain proper accounting records and reconcile payments against invoices and other transactions.
PayID does not replace proper accounting
Receiving money through PayID does not determine how the transaction should be treated for accounting or tax purposes.
The important question is what the payment represents.
For example, a PayID payment could be:
- payment for goods or services;
- reimbursement of an expense;
- repayment of a loan;
- a transfer between accounts;
- a grant or government payment; or
- another type of transaction.
Each may have different accounting and tax consequences.
Businesses should therefore ensure that PayID receipts are correctly recorded in their accounting system rather than simply relying on the bank transaction description.
What about government payments?
PayID is sometimes associated with Australian Government payments, but it is important to distinguish the two.
PayID itself is not an Australian Government payment system. It is part of Australia’s broader banking and payments infrastructure.
Government agencies have their own payment arrangements. For example, the Australian Taxation Office (ATO) does not currently have a PayID for receiving tax payments.
Businesses should always use the payment instructions provided directly by the relevant government agency rather than relying on payment details received unexpectedly by email, text message or another third party.
Be careful when payment details change
One of the biggest risks for businesses is not PayID itself, but payment fraud.
A common scam involves someone impersonating a supplier and requesting that future payments be sent to different bank details or a new PayID.
A simple rule is:
Never rely solely on an email requesting a change to payment details.
Instead, independently contact the supplier using a trusted phone number or existing contact information and confirm the change before making the payment.
When making a PayID payment, also check the name displayed by your banking app before confirming the transaction.
If the name does not match the person or business you expect to pay, stop and investigate.
What if you send money to the wrong PayID?
If you make a payment to the wrong PayID, contact your bank or financial institution as soon as possible.
Similarly, if you receive an unexpected payment from someone you do not know, contact your bank rather than automatically transferring the money back yourself.
PayID does not eliminate the possibility of mistaken payments or fraud, so businesses should continue to have appropriate payment controls in place.
The bottom line
For most Australians, PayID is already a familiar and convenient way to make payments. For businesses, the key issue is not simply how to use PayID, but how to use it responsibly.
Businesses should:
- keep their PayID information secure;
- verify changes to supplier payment details;
- check recipient names before making payments;
- regularly reconcile PayID transactions; and
- keep appropriate accounting and transaction records.
PayID is simply the method by which money moves. The underlying transaction still needs to be properly accounted for and, where relevant, considered from a legal, tax and compliance perspective.
If you are unsure how a payment should be recorded or how a particular transaction may affect your business, professional legal or accounting advice can help.
This article is provided for general information and educational purposes only. It does not constitute legal, financial or tax advice.
