New business payment laws a toothless tiger: O’Connor

A much-hyped law to name and shame big businesses to pay their smaller suppliers within 30 days has been labelled ineffective and “riddled with deficiencies”.

Minister for Employment Michaelia Cash during Question Time. Picture: AAP/ Mick Tsikas.

New laws to name and shame tardy payers among Australia’s biggest businesses have been criticised as ineffective and would leave the door open for companies to continue to blow out payment time to their small business suppliers.

The Morrison government’s payment times reporting framework, designed to force companies to reveal their supplier payment terms, passed the Senate on Thursday afternoon after securing the support of One Nation, leaving the Opposition fuming.

Labor’s small business spokesman, Brendan O’Connor, had attempted to strike a deal with Small Business Minister Michaelia Cash to introduce a “failsafe mechanism” into the legislation.

“The failsafe mechanism could be triggered after three years of the scheme operating and would allow the regulator, created by the government’s Bill, to force large businesses not paying small businesses on time to pay them within 30 days or face hefty fines,” Mr O’Connor said.

“(But) the government’s actions mean larger businesses will still get away with paying small business suppliers in as many as 180 days.

“The Payment Times Reporting Bill 2020 is weak and riddled with deficiencies, and continues the seven-year trend of this government failing to improve payment times for small businesses.”

Some of Australia’s biggest and well known companies have used the COVID-19 pandemic as an excuse to not pay their smaller suppliers on time, with Spotlight, Sussan Group, Solomon Lew’s Just Group and Flight Centre delaying payments during the health crisis.

The passing of the laws in the Senate comes a day after The Australian revealed that the Morrison government paid big four consultancy firm and supply chain finance advocate PricewaterhouseCoopers $120,000 of taxpayers’ money to provide “guidance material” to help businesses comply with the scheme.

The PwC contract angered Small and Family Business Ombudsman Kate Carnell, who said it was a waste of money, given the laws apply to companies turning over more than $100m a year and which are already well-resourced to comply with government directives.

In a letter sent to Senator Cash before the senate vote, Mr O’Connor urged her to consider amendments from Labor.

“We believe the Payment Times Reporting Scheme is a transparency initiative to support self-regulation. The efficacy of self-regulatory regimes is usually poor to questionable unless backed by a genuine threat of heavier-handed regulation. Currently, there is no genuine incentive in the Bill for large firms to improve payment times,” Mr O’Connor wrote.

“Labor’s amendment would introduce a ‘failsafe mechanism’. The failsafe mechanism means that over the next few years if the government’s scheme as designed does not broadly improve payment times to small businesses to 30 days or less, the failsafe mechanism is triggered.”

Xero’s small business advocate, Angus Capel, said that while the payment times reporting framework, which will be implemented at the start of next year, was welcomed, the government would have no choice but to mandate payment terms if the Bill failed to stop tardy payments.

“Protecting the small business sector’s ability to maintain healthy cash flow is vitally important to the COVID-19 recovery,” Mr Capel said.

“With e-invoicing set to become more widespread during the same period, we should hope to see payment times improve for small businesses. If not, the government will have no choice but to consider mandating 30-day payments to ensure cash continues to flow through to Australia’s small businesses.”