A bill setting out a new payment times reporting scheme, which requires big businesses to be transparent about their payment times, has been introduced in Parliament.
The Payment Times Reporting Bill introduces a payment times reporting scheme, requiring businesses with a total annual income of over $100 million to report on how and when they pay their small-business suppliers.
Welcoming the bill’s introduction, the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, said the aim is to legislate transparency, allowing small businesses to make a more informed decision about their potential customers.
“Much of the Australian small-business community has been devastated by the COVID-19 health and economic crisis and prompt payment times are critical to their survival,” Ms Carnell said.
“This reporting framework will require big businesses to be up front and honest about the time it takes to pay their small-business suppliers. It will be important that the information reported is easy to access and integrate.
“This gives small businesses some choice around who they do business with.”
Importantly, once the law passes Parliament, it will apply to around 3,000 Australian large businesses, including foreign companies that carry an enterprise in Australia along with certain government enterprises.
Ms Carnell stressed that another important feature of the bill is that it defines small business as those that have a turnover of less than $10 million — covering 99 per cent of all businesses.
“My office will be invoking the powers we have to investigate any reports of big businesses failing to live up to the information provided on this register once it is implemented,” Ms Carnell said.
While the bill strikes a balance between upping transparency for small business without imposing a counterproductive burden on large business, Ms Carnell believes that more needs to be done to eradicate the problem of late payment times.
“We support the Payment Times Reporting Framework as one piece of the puzzle, but it won’t solve the problem of late payment times on its own,” she said.
“Legislation requiring SMEs to be paid in 30 days is the only way to drive meaningful cultural change in business payment performance across the economy.
“Ultimately, cash flow is king for small business and we know that if small businesses are paid on time, the whole economy benefits.”
According to the government, the legislation has been developed following consultation in 2019 and 2020 with small and large businesses, business representatives and the government.
Under the changes, businesses will also be asked to detail their use of supply chain financing practices. This will highlight when it is used by large businesses to extend payment times.