The Morrison government’s plan to force large companies to disclose their small business invoice terms has come under pressure over claims the reforms won’t deliver “meaningful change” in late payment times.
Small business advocates lined up against lobbyists for major corporations on Tuesday, amid attempts to water down the Payment Times Reporting Framework, which will require businesses with more than $100 million in annual turnover to file biannual reports about their small business payment times.
Introduced to parliament in May, the reforms are designed as a binding transparency mechanism to encourage large businesses to improve their payment terms, but Labor Senators on the Education and Employment Legislation Committee sought to poke holes in the government’s plan yesterday.
Chief among concerns is that the Payment Times Reporting Bill 2020 won’t actually do what it says on the tin: reduce payment times to small business suppliers.
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Australian small and family enterprise ombudsman (ASBFEO) Kate Carnell told the hearing that plans to name and shame big business did not go far enough, with some companies already saying the laws would not change their practices.
“We’re not convinced the scheme will achieve meaningful change in payment times from a large number of large businesses,” Carnell said.
“[Name and shaming] has worked for some companies, and has been fundamentally a failure for others.”
While the reforms will force large companies to report on their payment practices, small business advocates are concerned many big businesses will simply retain payment terms longer than 30 days because it remains legal to do so.
Such was the nature of the hearing that much discussion centered around the prospect of outlawing payment times longer than a month, despite the reforms focusing on reporting transparency.
While ASBFEO, Self Employed Australia and the Council of Small Businesses of Australia support mandating 30-day payment terms, other groups, including the Business Council of Australia remain opposed.
Even the Department of Industry, Science, Energy and Resources has sought to pour cold water on the prospect of mandated payment terms, arguing in its submission to the committee the policy has been ineffective in other jurisdictions and could even harm small businesses.
“Mandated payment times of 30 days or longer have been demonstrated to lengthen payment times for some small businesses,” the Department said.
“As these policies establish a norm for payment length, some businesses who pay more quickly lengthen their payment terms to meet this new standard.”
Carnell said the existing Bill should not be held up for further consideration about outlawing payment times longer than a month, instead pushing for the reforms to be reviewed with an eye to strengthening the framework down the track.
“We’re better to have this than not to have it, but then the importance of doing regular reviews of whether it is achieving the outcome of what we want it to achieve, and that is improving payment times to small businesses rather than maintaining the status quo,” Carnell said.
With the likelihood the Bill will move ahead largely as-is, it was revealed yesterday the Department of Industry plans to oversee the reporting framework with fewer than a dozen staff, who would be required to review more than 6000 submissions from large businesses every year.
Large businesses are lobbying the government to water down the reporting framework while accepting the benefit of the reforms in principle.
While telecommunications giant Optus did not appear at the hearing on Tuesday, it said in a submission that the government should amend several parts of the legislation to reduce penalties, improve reporting flexibility and lower the frequency of reports from every six months to annually.
In its evidence to the hearing, the Australian Industry Group outlined a series of concerns with the existing legislation, arguing small businesses could be cut out of large business supply chains in an attempt to avoid reporting obligations.
“In putting an obligation to report on larger businesses in relation to transactions with smaller businesses, whether that would be a deterrent against big businesses transacting with smaller businesses,” AIG’s head of influence and policy Peter Burn said.
The Senate Education and Employment Legislation Committee is due to hand down its report on the reforms on July 30.