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The government has been called to adopt a consistent small business definition to avoid manipulation by larger businesses, the Australian Small Business and Family Enterprise Ombudsman has said.
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Small business definition a ‘major blockage’, says ASBFEO
10 February 2020
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9 minute read
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) has released a position paper outlining the key preliminary findings of its review into supply chain financing.
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A key finding of the report has found that large businesses continue to use various definitions of small business, with some using the restrictive “fewer than 20 employees” definition, while some requiring satisfaction of both an employee number and a lesser than $10 million turnover threshold.
“The definition of a small business continues to be a major blockage, and a unified approach would be beneficial to small businesses,” said ombudsman Kate Carnell.
“There are too many small businesses that have to wait too long to get paid. This is in part because the definition of small business is wide open to manipulation under the Supplier Payment Code.”
To prevent such manipulation, Ms Carnell has called for a consistent small business definition to be adopted by government.
Calls for a uniform small business definition have been made before, with the Board of Taxation most recently pushing for a harmonised definition set at a $10 million turnover threshold to apply across all small business tax concessions.
The ASBFEO has also called for the Supplier Payment Code to be replaced by the government’s Payment Times Reporting Framework, enforced by an “appropriately funded and proactive entity”.
“The fact is that all businesses, regardless of their size, should be paid in 30 days, and supply chain finance should be available to those small businesses that want to be paid faster,” Ms Carnell said.
The ASBFEO also believes the Australian Accounting Standards Board (AASB) needs to play a role in regulating supply chain financing, calling for accounting standard to “provide greater clarity and properly cover supply chain financing to ensure that accounts cannot be manipulated, particularly to mask cash-flow issues and insolvency”.
The ASBFEO is calling all interested stakeholders to provide further comments by 28 February before it finalises its recommendations to government.
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