The government introduced the Payment Times Reporting Bill in the House of Representatives yesterday. The new law will require large businesses to report on payments terms for their small business suppliers.
The Payment Times Reporting Scheme will apply to any business or government enterprise with annual income of A$100 million or more. Reporting will be every six months.
Small business suppliers covered by the scheme will be entities with an annual turnover of less than $10 million.
Reporting will be made public. The aim of the scheme is to improve payment outcomes for small business.
The government expects that transparency on payment practices will create pressure for change in large companies.
The scheme will be administered by the Payment Times Reporting Regulator, who will publish reports on a register called the Payment Times Reports Register.
The Australian Small Business and Family Enterprise Ombudsman has campaigned for better small business payment terms. Last year it released the results of a review of supply chain finance, which found that many businesses have a practice of extending payment terms and then offering supply chain finance (early payment at a discount).
“This practice severely impacts small business suppliers and is clearly unacceptable. There is increasing abuse of supply chain finance,” the review said.
The review found there is a lack of contractual transparency in many of these arrangements.
The information memorandum accompanying the bill says long-dated payment terms and late payments “are a significant problem for Australia’s 3.4 million small businesses, with negative impacts not only on these businesses but also more broadly across the economy.”
The government’s own research indicates that more than one-third of small business invoices are paid after 30 days.
The new law is to take effect from January next year.