On Friday, the Greens announced that they will introduce legislation later this year to enforce penalties for corporations and governments for late payments to small businesses, contractors and freelancers.
“Payment times by Australian corporations are by far the worst in the developed world. Big corporations and governments are treating smaller operators like piggy banks,” Greens small business spokesperson Senator Nick McKim said.
“Late payments are creating unnecessary stress and anxiety for small business owners and their families. Financial penalties on big corporations and governments for withholding payments will help ensure small businesses, subcontractors and freelancers are paid on time.”
The penalties will apply for contracts involving a small business with an annual turnover of $10 million or less, and a large business with an annual turnover of $25 million or more, or government agency, when payments to the small business are not made within 30 days.
The Institute of Public Accountants (IPA) has voiced its support for the proposed legislation.
“The IPA has long advocated for responsible timely payment to small businesses. Too often, small business cash flow is held to ransom by the failure of big businesses to pay small business invoices in a timely manner,” said IPA chief executive officer, Andrew Conway.
“The commercial world is still lagging behind government agencies which are required to pay within 30 days or else interest must be paid. Healthy cash flow provides ongoing incentive to reinvest in their businesses; which extends the economic benefit of growth and the capacity to employ.”
Last week the Business Council of Australia introduced a voluntary code of conduct for big business payment times to small business, with a number of big businesses reportedly signing a pledge to pay their invoices within 30 days and to have payment times publicised.
“I am pleased to see industry taking proactive steps to ensure small business invoices have reasonable payment terms and are paid on time by a number of big businesses, and I encourage more big businesses to follow suit,” small business minister Michael McCormack said.
“While I welcome this code as a positive first step, I will be keeping a close eye on how the code is adopted, its take up rate, how it works in practice and the encouragement it provides to big businesses throughout Australia.”
In contrast, Greens’ Mr McKim slammed the voluntary code of conduct, saying that it “will not do the job.”
This follows the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) calling on the government to introduce legislation that will set a maximum payment time for big businesses to pay their small business suppliers in the release of its final report on payment times in April.
The not-to-be-missed Accountants Daily Strategy Day will travel through Melbourne and Sydney in August to equip accounting professionals with the latest industry updates and tips for modern practice management as well as the latest cutting-edge technology, processes, strategies and trends shaping the future of accounting. Visit the website for more information: www.accountantsdaily.com.au/strategy-day