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Payment times transparency will not solve small-business woes, says Labor

Federal Labor has criticised the government’s plan to publish the payment practices of large businesses, warning that the lack of hefty penalties will not help small businesses get paid on time.

Business Jotham Lian 31 August 2020
— 1 minute read

Shadow minister for small and family business Brendan O’Connor will instead call for an amendment that will force large businesses not paying small businesses on time to do so within 30 days, or face hefty fines.

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Labor will seek to move the amendment when the Payment Times Reporting Bill 2020 is debated in the Senate this week.

The bill currently proposes to make it mandatory for businesses with an annual income of over $100 million to provide biannual reports on their small business payment terms and practices.

The government hopes that greater transparency will allow small businesses to make more informed decisions about their potential customers, and create pressure on large business to improve their payment times.

If passed in its current form, the requirement will begin from 1 January 2021.

However, Mr O’Connor believes there are “straightforward deficiencies” with the bill and that more stringent regulation is required to effect change.

“This light-touch transparency is unlikely to significantly improve the status quo of self-regulation of payment times by big business,” Mr O’Connor said.

“The bill does not mandate maximum payment times to small businesses, as the small business ombudsman has called for. Nor does it provide for penalties or remedies on invoices that are paid late or with payment times greater than 30 days.”

Mr O’Connor believes Labor’s “failsafe mechanism” amendment, which will be triggered after three years of the scheme operating, provides an incentive for large entities to collectively improve their payment practices or run the risk of penalties.

While Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell has continued to advocate for the introduction of a 30-day mandated payment time, she has acknowledged that the bill is a step towards solving late payment times.

“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,” Ms Carnell said.

“Ultimately, cash flow is king for small business and we know that if small businesses are paid on time, the whole economy benefits.”

The bill is likely to pass this week, after a Senate committee gave it the green light late last month.

Payment times transparency will not solve small-business woes, says Labor
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Jotham Lian

Jotham Lian

Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.

Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.

You can email Jotham at: This email address is being protected from spambots. You need JavaScript enabled to view it. 

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