House debates

Wednesday, 13 May 2020


Payment Times Reporting Bill 2020; Second Reading

10:34 am

Photo of Karen AndrewsKaren Andrews (McPherson, Liberal Party, Minister for Industry) Share this | | Hansard source

I move:

That this bill be now read a second time.

Today I am pleased to introduce the Payment Times Reporting Bill 2020.

This bill will implement the government's commitment to require large businesses and government enterprises with a total annual income of over $100 million to report on their small business payment terms and times.

We are facing unprecedented challenges as we respond to the global COVID-19 pandemic. The global and the domestic economic environment has deteriorated and we now expect the economic shock to be deep, wide, and long. Now, more than ever, we need to support small businesses.

We know that small businesses are the lifeblood of our communities and the backbone of the Australian economy. With the impact of COVID-19 it is even more important that large businesses, as stewards of their supply chains, pay small businesses promptly.

Instead, while some large businesses are doing the right thing, others are taking longer to pay their bills, worsening cash flow for small businesses who desperately need the money that they are owed.

The Prime Minister has been very clear on what large businesses need to do in the current environment. They need to support workers by keeping them employed, with appropriate leave arrangements, as needed. They need to pay small business suppliers promptly, even ahead of time.

The actions they take now will say more about those companies, their corporate values and the integrity of their brand, than anything else they've likely done as an organisation.

Research shows that in 2017-18, payments from large to small business were worth around $281 billion with $77 billion of these payments paid later than 30 days. When payments were paid late, the average length of time for small businesses to be paid was 63 days.

Longer payment times hurt small business cash flow and this harms their ability to hire, invest and grow. Cash-constrained small businesses are often forced to seek out expensive forms of financing in order to sustain their business operations. Late payments also have a flow-on effect across the economy as small businesses paid more slowly, pay their suppliers more slowly in turn.

If all large businesses in Australia paid small businesses within 30 days, it would result in a transfer of working capital from large to small businesses of approximately $7 billion and create an overall net benefit to the Australian economy of $313 million per year and around $2.6 billion over 10 years.

With the Commonwealth awarding contracts worth $16.7 billion to small and medium enterprises in 2018-19, the government recognised it needs to lead the way on good payment practices. That's why we have already adopted a range of measures to improve payment times. Since July 2019, Commonwealth agencies have paid invoices for contracts up to $1 million within 20 calendar days or paid interest on any late payments. This captures approximately 95 per cent of procurement contracts entered into by the Commonwealth.

In addition, from 1 January 2020, e-invoicing capable government agencies have paid e-invoices valued up to $1 million within five days. If they don't, they pay interest. Commonwealth agencies will be progressively coming on board with e-invoicing capability throughout 2020.

Now it's time for big business to step up. The Payment Times Reporting Bill will require large businesses to report on how quickly they say they will pay and when they actually pay their small business suppliers. Small business suppliers for the purposes of the scheme are those businesses with an annual turnover of less than $10 million.

Large businesses will also be asked to report on their use of supply chain financing practices. Small businesses need to be armed with information about who they do business with. There are too many incidences of large businesses taking advantage of these arrangements by extending the length of their payment terms, with small businesses being forced to enter into these arrangements where they have to agree to reduce the amount they are paid in order to get paid in a reasonable time.

The bill will bring into effect twice-yearly reporting for around 3,000 large businesses that are incorporated or have a physical presence in an Australian territory or are foreign businesses that carry on an enterprise in Australia.

Commonwealth corporate entities and Commonwealth companies who meet the income threshold will also be required to report. Enterprises such as Australia Post and NBN Co will be required to report their payment practices for the first time.

Information from these payment times reports will be made publicly available on the Payment Times Reports Register, creating an incentive for large businesses to improve their payment performance. Transparency of payment terms, times and supply chain financing practices will allow small business and the public to better identify and engage with companies that pay on time.

Businesses found to be non-compliant with the reporting requirements of this bill will be named as such on the publicly available Payment Times Reports Register.

The bill establishes the Payment Times Reporting Regulator to administer the legislation and monitor and enforce compliance as necessary. The power of the regulator extends to obtaining and publishing information, monitoring, investigating and enforcing civil penalties, as well as directing an entity to undertake an audit of their payment practices on the reasonable suspicion of wrongdoing.

Significant penalties will be in place to ensure that large businesses comply with the scheme. Penalties will apply for noncompliance, including failure to report or report accurately. For example, there will be penalties for providing misleading information of up to 0.6% of the annual income of the business. These penalties are designed to reflect the seriousness of the government's commitment to addressing the issue of payment times and practices. It will ensure small businesses can rely on the information to make decisions about doing business with particular large businesses.

While the core obligations of reporting entities are specified in the act, more technical and administrative details will be dealt with in the supporting rules. This means the rules can respond more flexibly to changing business and industry practices.

This bill has been informed by and reflects extensive consultation with small and large business as well as industry organisations since early 2019.

I know businesses are always concerned, when regulation is introduced, that the compliance will be onerous.

The reality is that a culture of longer payment times to suppliers has developed and it is holding us back economically.

We have already seen the benefits of our approach to shine a light on bad payment behaviour. Recently a number of large businesses rapidly abandoned payment practices which negatively impacted on small businesses once they were subject to public scrutiny.

The Payment Times Reporting Bill 2020 strikes the right balance of providing transparency for small businesses without creating an unnecessary regulatory burden for businesses both large and small.

With the impact of COVID-19 it is now more important than ever that large businesses pay small businesses promptly.

These are extraordinary times for all Australians. The government is acting decisively and responsibly to support the economy to overcome the challenges posed by COVID-19. This bill reflects the government's commitment to support small business and ensure that it continues to play a critical role in driving Australia's future economic growth.

I commend this bill to the chamber.

Debate adjourned.