The Coalition government’s 2015 budget is historic, unprecedented and a game changer. With our growing jobs and small business package, it is the biggest economic recognition of the sector in Australia’s history.
The first tranche includes giving all small businesses an immediate tax deduction on any asset they buy costing up to $20,000, (a cut to the small business company tax rate and the lowest in almost 50 years).
Additionally, accelerated depreciation for agricultural investment for fencing, water management and fodder storage, have passed both houses of parliament. In the final winter sitting, we introduced the second tranche.
Our small business budget package builds on our work to faithfully implement each and every election commitment for the hardworking women and men of Australian small business.
We took more than twenty small business specific promises to the last election, which we have met - a key commitment was to extend the unfair contract terms (UCT) protections available to consumers to small business.
For years, I have argued that in many cases small businesses have no more market power or ability to vary - ‘take it or leave it’ - standard form contracts than an individual consumer. They lacked the consumer–style protections that provide for unfair terms to be struck out of such contracts.
That’s why the Coalition’s policy for small business included the commitment to “provide a ‘fair go’ for small business by extending the unfair contract protections currently available to consumers to cover the small business sector”. This is exactly what the Abbott government is doing.
Unfair contract terms are an issue of significant concern to small business. Examples include the dominant party asserting a right to unilaterally vary terms, rights to termination and legal redress that are not reciprocated, the application of arbitrary costs and automatic renewal clauses, pay-out requirements and obligations without reasonable grounds.
In 2013, state and territory consumer affairs ministers agreed to progress our proposal for a federal legislative extension of unfair contract term protections to small business in this area of co-regulated law in Australia.
In 2014, a 10-week public consultation process was conducted and detailed consultation paper was released prompting 80 submissions and around 300 responses to an online business survey.
In November 2014, the findings of this consultative process were embraced and shaped the design of the required legislative changes. Then in December, the Financial Systems Inquiry endorsed the government’s process to extend UCT protections to small business alongside a strengthening of the Banking Code of Conduct to deal with concerns like how lenders exercise non-financial covenants and other discretions embedded in contracts.
To carry over the consumer unfair contracts terms protections, the consultation has sought to draw out and define clear and easily understandable definitions of when and in what mode a small business may be able to exercise the UCT protections when confronted with standard form ‘take-it-or-leave-it’ contracts.
To bring into operation our election commitment and based on our consultations, I have proposed a range of parameters to capture consumer-like small business contracts to enable the extension of the consumer UCT protections.
Seeking to settle on a known and more readily recognised way of identifying a small business that could utilise the UCT protections, a simple head-count of less than 20 employees as used by the ABS and ASIC is considered most useable.
This excludes more substantial businesses that should have the resources and bargaining power to protect themselves against unfair contract terms and reflects the consumer-like characteristics of the enterprises faced with the contract.
Secondly, in identifying consumer-like small business contracts, we focused on the kind of ‘take-it-or-leave-it’ standard form contracts smaller enterprises are confronted with and are vulnerable to in the ordinary course of business.
Our surveys confirmed that standard form contracts are widely used in Australia when businesses purchases goods and services.
Examples raised included: telecommunications contracts, financial services and credit contracts, and online advertising services contracts.
The proposed $100,000 transaction limit or $250,000 for multiple year contracts covered under the UCT protections covers more than 4 out 5 standard form contracts offered to small business according to survey respondents.
Beyond these values, it is right, reasonable and reflects good business practice for all enterprises to seek advice on these larger contracts. It is important to make it clear that we do not believe it is the role of government or agency bureaucrats to be ‘contract nannies’.
The transaction value limits proposed and endorsed by the majority of State and Territories did have its critics. During the consultation phase, differing stakeholders argued that they were too high and others expressed they were too low.
Government contracts are not free from scrutiny and the need to be fair. The UCT provisions, just like all provisions of the Competition and Consumer Act 2010 apply to the crown insofar as it is contracting in the course of carrying on a business.
Beyond the reach of the law, it is a key focus of the proposed small business and family enterprise ombudsman (provided for in legislation currently before parliament) to work to ensure that the Federal Government conducts itself as a ‘model business’.
We are pushing on because we believe there is no place for unfair terms forced on small business in ‘take-it-or-leave-it’ standard form contracts that harm or cause detriment to the small business, are not reasonably necessary and cause a significant imbalance in the parties’ rights and obligations.
We are working each day, as hard as small business people do, to energise enterprise and to create the right conditions that will recover the economic growth, jobs and investment momentum lost under Labor.
We are doing exactly what we said we’d do and I am ensuring the full delivery of this Coalition’s election commitment. We will not stray from our ambitions to be the best friend and most supportive Australian Government small business women and men have ever had.
Bruce Billson is the federal minister for small business and the federal member of Dunkley.