Small Business payments legislation a "step in the right direction"
Updated: Sep 4, 2020
Legislation to implement the Payment Times Reporting Scheme was passed by the Senate today, putting 'big business' on notice to improve payment times to small business suppliers.
But Australian Small Business and Family Enterprise Ombudsman Kate Carnell, says, while a step in the right direction, it won't itself solve the late payment problems of small businesses.
Under the scheme, large businesses and applicable government enterprises with a total annual income of over $100 million will have to report publicly on how and when they pay their small business suppliers.
The transparency is intended to encourage large businesses to change their practices which negatively impact on the cash-flow of small business.
However, the scheme does not go as far as the NSW Government's Faster Payment Terms Policy requiring government agencies to pay registered small businesses within five business days. The NSW Policy also allows credit card use for instant payments to registered businesses for accounts under $10,000.
Minister for Employment, Skills, Small and Family Business, Senator Michaelia Cash, said the Federal Government measure would support small businesses, especially through COVID-19 challenges.
“Late payments have a significant impact on small business cash flow and inhibit the ability of a firm to invest, grow and employ,” Minister Cash said.
Ms Carnell, welcomed the legislation as a "step in the right direction" but said the scheme itself would not solve the late payment problem for small business.
"We support the Payment Times Reporting Scheme as passed by the Senate, however Labor’s ‘failsafe mechanism’ amendment would have strengthened the Bill," she said.
“The proposed failsafe mechanism would have allowed the regulator to force big businesses to pay their small business suppliers in 30 days or face hefty fines, but the amendment was unsuccessful."
Ms Carnell said that legislation requiring SMEs to be paid in 30 days was the only way to drive meaningful cultural change in business payment performance across the economy.
“Cash flow is king for small businesses and when small businesses are paid on time the entire economy benefits," she said.
The legislation applies to around 3,000 Australian large businesses, including foreign companies that carry on an enterprise in Australia along with certain government enterprises.
It defines small businesses as those having less than $10 million turnover per year, which covers 99 per cent of businesses.
Ms Carnell said her office would invoke its powers to investigate any reports of big businesses failing to live up to the information provided on this register once it is implemented.
The new requirement comes into effect from 1 January 2021, with a 12-month transition period to allow large businesses to familiarise themselves with the scheme, before compliance and enforcement actions apply.