Louise Pratt (WA, Australian Labor Party, Shadow Assistant Minister for Manufacturing) Share this | Hansard source

I also welcome the Payment Times Reporting Bill 2020. It is a step in the right direction to support the cashflow of small business in our nation. It's a small step in the right direction, but Labor believes it could be—and it can be with the right amendments—a much better and stronger step to support cashflow for small business.

We know that the bill before us puts in place a reporting scheme requiring around 3,000 large businesses and government enterprises with turnovers of $100 million and above to report biannually on their payment terms and practices for their small business suppliers. 'Small business' will be defined as businesses with less than $10 million in turnover, and a small business identification tool will be created to assist larger businesses identifying their small business suppliers.

We have heard the government argue, just as Senator Stoker argued in speaking before me, that the purpose of the scheme is to improve payment times for small businesses by making the payment times for practices of larger businesses more transparent. They've argued that transparency is an adequate measure to create cultural change and put pressure on payment time practices in our nation. I acknowledge the consideration that the government might have given to the flaws of overseas schemes that have regulated and mandated payment times, but I think we can and should be a little bit cleverer than that here in the way we legislate on those questions.

This bill puts in place a regulator appointed by the Secretary to the Department of Industry, Science, Energy and Resources. That regulator publishes the reporting entity reports or payment times on an essential public register that will be known as the Payment Times Reports Register. That register will include aggregated data on the reporting entities—larger businesses' payment terms and practices of that identifying entity.

Reporting is supposed to begin in January next year, and entities that fail to maintain payment records or provide false information may contravene a civil penalty provision. So that is essentially only a transparency measure, and I don't think that's going to be enough to support small business in Australia. As we've heard in the evidence before the Senate inquiry, there are many companies that simply don't mind what their public reputation is regarding these matters. They actually just leverage off their market control as large companies. They're able to dictate long payment time terms. Even if that's not what is written on the original contract or invoice, they dictate and move to those long payment times, because they can simply afford to string small businesses along because those large businesses are not as dependent on the small businesses as the small businesses are on the larger businesses.

We on this side of the chamber are very concerned about what is, frankly, a light touch when it comes to the nature of payment times and their importance to small business. We very much understand cashflow, the survival of small business and how critical prompt payment times are. Small businesses need healthy cashflow. Without good cashflow, we are seeing small businesses already experience much higher interest rates from banks, whereas larger businesses have more capacity to raise capital and juggle their finances around.

Unfortunately, despite the financial flexibility of larger businesses, in Australia we have seen some firms take advantage of smaller businesses to boost their own working capital. Indeed, the small business ombudsman gave us evidence of some international companies that simply said that it wouldn't really matter what they were forced to report through a regime like this. The overseas company has international policy settings, and they will mandate what those payment times are—and they can be up to as long as 180 days. So transparency will do diddly squat, really, to manage payment times where there is an overseas business which mandates the long payment times so they can leverage profits out of it at the expense of small business.

Some payment times are indeed unconscionably long: 180 days or more. When coupled with the practice of supply chain financing, or reverse factoring, these long payment times become even more obscene in the sense that small businesses who have been forced into 180-day payment times have asked why that should be legal and why anything hasn't been done to stop it, and then they end up being victims of supply chain financing or reverse factoring. They end up taking a discount on the money that they're owed by the company to which they supplied simply in order to get paid on time or to get paid in a reasonable length of time. Behaviour like this is simply unacceptable. Labor has said this for a long time, and we don't believe that this legislation goes nearly far enough in fixing the issue.

The member for Fenner, my colleague in the other place, said back in 2016: 'The reason these large companies are squeezing suppliers is simple: it improves their cash flow and makes them money. Even in the current low-interest-rate environment, there's money to be made from taking your time to pay up. The reason firms can get away with longer payment terms is straightforward: the reason they get away with it is they're big companies.' That was back in 2016. During the COVID crisis we've heard about even further egregious behaviour by large companies, such as Premier Retail and The Just Group. They have unilaterally extended payment terms for up to 180 days, which is six months. That's six months in an environment where small businesses might be struggling and already have their backs against the wall. The Just Group, run by Solomon Lew, is particularly offensive to smaller businesses, given that at this time Solomon Lew told landlords that they wouldn't pay rent but they've accessed JobKeeper and they've reported record profits for the financial year. These are some of the companies who extend payment times simply because it makes them extra profits. When we bring reverse factoring into that, payment times are blown out well beyond 30 days, and third-party financiers steps in—oh!—to save the day and pay the bill on time, but at a discount. In other words, small businesses must pay to be paid on time.

These practices are outrageous and there is nothing in this bill that actually prevents them. What's to stop someone saying, 'Oh, yes, we paid your bill on time; it's here that the bill is paid and we reported that it was paid on time'? But was it fully paid on time or was it paid with reverse factoring inside it so the small business didn't receive what they were owed? In the bill, the definition of 'supply chain financing' and the associated reporting requirements are contained in the minister's rules. The draft rules require a large entity to report on whether they use supply chain financing and to detail those arrangements and the proportion of invoices paid under such arrangements.

We might not know, through this so-called transparency scheme, exactly how much of a loss small businesses have faced in order to get their invoices paid on time. I think it's certainly problematic, that the only reference to supply chain finance is this passing reference to what the minister may include in the rules. We have no guarantee that a minister won't remove requirements to report on the use of such arrangements on the whim of or due to pressure from proponents of supply chain finance. Along with those that I've already outlined, Labor's primary concern is simply that transparency—

Debate interrupted.