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Government moves to speed up subcontractor payments

Adam Zuchetti
Adam Zuchetti
02 August 2018 1 minute readShare
red approved stamp government speed up subcontractor payments short payment terms 30 day

Subcontractors are set to enjoy shorter payment terms with news that the federal government is extending the maximum 30-day payment terms to all subcontracting businesses operating within its various agencies and departments.

Research earlier in the year by SME lender Scottish Pacific found that almost 93 per cent of the 1,200 businesses surveyed suffered lost revenues because of cash flow problems.

Late payment of invoices is often cited as a major contributing factor to cash flow constraints.

The government last year amended its contract terms to ensure that 30-day payment terms were the norm, and this latest revision extends the same payment time frame to subcontractors down the supply chain.

“I commend the Department of Finance for listening… and changing the ‘Subcontractor’ clause in its Commonwealth standard payment terms to include payment terms of 30 days or less,” said Kate Carnell, the Australian Small Business and Family Enterprise Ombudsman.

“In addition to this, the same obligation is to be included in every secondary subcontract. This means the payment term of 30 days or less will be in every ‘Contractor’ and ‘Subcontractor’ contract the ‘Prime Contractor’ employs.”

Ms Carnell noted the updated requirements will also be included in pre-drafted contract terms.

“The 30 days or less payment time, and inclusion of only relevant subcontractor obligations, is a significant step in the drive for fairness and balance in Commonwealth projects,” Ms Carnell said.

“We expect all Australian government departments and agencies to use this clause in contracts and give small businesses and contractors peace of mind, financially and mentally, when working with government.”

The federal government has led the way in reforming its payment processes to be more SME-friendly, while state governments, by contrast, have been among the slowest to pay their invoices, along with many multinationals.

Government moves to speed up subcontractor payments
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Adam Zuchetti
Adam Zuchetti

Adam Zuchetti is the former editor of MyBusiness and a senior freelance media professional, specialising in the fields of business, personal finance and property. In 2020, he also embarked on his own business journey – inspired in part by the entrepreneurs and founders he had met through his journalistic work – with the launch of customised pet gifting and subscription service Paws N’ All.

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