Division Description Changes — Bills — Payment Times Reporting Bill 2020, Payment Times Reporting (Consequential Amendments) Bill 2020; Second Reading — 11th Jun 2020

Change	Division
representatives vote 2020-06-11#6 Edited by mackay staff on 2020-07-03 13:25:43	Title Bills — Payment Times Reporting Bill 2020, Payment Times Reporting (Consequential Amendments) Bill 2020; Second Reading Payment Times Reporting Bill 2020, Payment Times Reporting (Consequential Amendments) Bill 2020 - Second Reading - Concerns Description ~~<p class="speaker">Andrew Wallace</p>~~ <p>Whether it's in the building industry or in the broader economy, some larger businesses have for many years exploited the vulnerabilities of those small businesses below them in the contractual chain. These are often mum-and-dad businesses. These small business owners work damn hard to provide for their families and in some cases struggle to keep their heads above water. These small family businesses are not asking for handouts. They just want to be paid the money they are owed for the work they were engaged to do—the work they did in fact perform. The statistics around payment times are very sobering. More than a third of small business invoices are paid after 30 days. These invoices take an average of 63 days to be paid. If all large businesses in Australia paid small businesses in 30 days, $7 billion in working capital would be transferred from large to small businesses, creating a net benefit to the economy of some $313 million each year. Only 80 out of 3,000 large businesses in Australia have signed up to the Business Council of Australia's voluntary supplier payment code in the three years since it began. It is simply not good enough that less than 0.3 per cent of large businesses have acknowledged this is a problem that needs to be addressed.</p> <p>The Payment Times Reporting Bill 2020 requires large businesses and government enterprises with an annual income over $100 million to publish information on how and when they pay small businesses—that is, businesses with a turnover of under $10 million. From 1 January 2021, twice annually, around 3,000 large business will be required to produce a payment times report, including: the shortest and longest standard payment periods offered; the proportion of small business invoices paid in less than 21 days; those paid in between 21 and 30 days, between 31 and 60 days, and more than 60 days; the proportion of all procurement from small business suppliers; and, finally, their use of supply chain financing practices, which often force small businesses to accept a reduced amount if they want to be paid in a reasonable time. The provisions of the bill place a requirement on businesses that are incorporated, or have a physical presence in Australia, or are foreign businesses that carry on an enterprise in Australia that meets the income threshold, plus Commonwealth corporate entities and Commonwealth companies that meet the income threshold. Information from these reports will be made publicly available on a payment-times reports register for searching by small businesses or members of the public.</p> The majority voted in favour of keeping unchanged the usual [second reading motion](https://peo.gov.au/understand-our-parliament/how-parliament-works/bills-and-laws/making-a-law-in-the-australian-parliament/), which is "that the bill be read a second time" (parliamentary jargon for agreeing with the main idea of the bill). This question was put after Gorton MP [Brendan O'Connor](https://theyvoteforyou.org.au/people/representatives/gorton/brendan_o'connor) (Labor) moved an amendment that would have removed all the words after 'that' and replaced them with other words (see below). ### Amendment text *> That all words after "That"** be omitted with a view to substituting the following words:* > *> "whilst not declining to give the bill a second reading, the House expresses concerns over deficiencies** in the bill, including the:* > *> (1) lack of certainty** that the measure will lower payment times;* > > (2) light treatment of supply chain financing; and > *> (3) ability for businesses to hide extremely long** payment times to small businesses".* <p>The new requirements will be supported by a payment-times-reporting small business identification tool to assist corporates in identifying their small business suppliers. The bill establishes a payment-times-reporting regulator to monitor and enforce compliance. The regulator will have powers to obtain and publish information, to investigate and to enforce civil penalties, as well as direct an entity to undertake an audit of their payment practices. Significant penalties will be in place to ensure that large businesses comply with the scheme. Failure to report has a maximum penalty of 60 penalty units for an individual or 300 penalty units for a body corporate. Providing misleading information has a maximum penalty of 350 penalty units for an individual and 0.6 per cent of the total annual income for a body corporate.</p> <p>Not only will this register shine a very bright light on the shadows of large businesses with poor payment practices, and thereby incentivise them to clean up their act, but small businesses, mum and dad family businesses, will be able to assess the payment performance of a larger business when deciding whether to do business with them. Information is key to small businesses when pricing in the prospect of late payment, and this bill will do just that. Recently, businesses like Rio Tinto and Telstra rapidly abandoned poor payment practices, once they were subject to public exposure. Their payment policies were quickly shortened so suppliers were paid within just 20 days.</p> <p>Many people might be wondering what the federal government is doing in this regard. The federal government is leading the way, and leading by example, in relation to responsible payment times. Since July 2019, Commonwealth agencies have paid invoices for contracts up to $1 million within 20 calendar days, or they will pay interest on those late payments. This captures 95 per cent of procurement contracts entered into by the Commonwealth. In addition, from 1 January 2020 government agencies capable of e-invoicing have been paying e-invoices valued at up to $1 million within five days. If they don't, they pay interest. Commonwealth agencies will be progressively coming on board with e-invoicing capability throughout 2020. The Commonwealth is also developing a procurement policy where large businesses who tender for government contracts will be required to match the Commonwealth's 20-day payment policy. This is a game changer. The federal government is leading by example and I have no doubt that businesses, particularly those that deal with the federal government, will come on board. I commend the bill to the House.</p> ~~<p class="speaker">Matt Keogh</p>~~ <p>Labor welcomes the debate on the Payment Times Reporting Bill 2020 and the Payment Times Reporting (Consequential Amendments) Bill 2020. We do so because we have long advocated for better payment practices to small business suppliers. We welcome these bills as a step in the right direction. From the outset, I emphasise that Labor supports the intent of this legislation as a first step in improving the payment practices of large businesses to their small business suppliers. As my colleagues and I, and indeed our fantastic candidate for Eden-Monaro, Kristy McBain, are all too aware, cash flow and prompt payment times are critical for small businesses.</p> <p>Imagine you've kicked off your own small business, manufacturing a product, and you score a contract with a mining giant to supply a critical part. You think you've hit the big time. You really think you've struck it lucky. But then that mining giant tells you that it will pay you what it owes in 60 days, and then maybe 90 days, but maybe that can be sped up if you can cut them some slack and trim down the invoice to a more palatable amount. You're out of pocket for the product, the labour and the materials, but they're a much bigger organisation than you. What can you do? You can't get your big first major client offside, but you also can't afford not to be paid. You cop the wait.</p> <p>Imagine, perhaps, that you're a sole trader, a photographer taking shots for some of the nation's biggest retail chains. You spend hours—days, in fact—preparing, shooting, editing and re-editing the images. You've perhaps said no to smaller jobs in order to get this big one done. Then these retailers tell you that they'll pay you in 90 days or so, and then they say: 'Actually, can we make that 120? Surely you understand COVID is rough and we don't have the cash flow to pay your invoice at the moment.' You feel like you're propping up their ASX listed business at the expense of your own microbusiness, helping keep their heads above water while drowning yourself. But once again you don't have a choice. You don't want to say anything for fear of losing future work from them. You bite your tongue. After all, what they are doing isn't illegal. You're the little guy. You'll just have to wait it out.</p> <p>The practices of reverse factoring, or pushing out payment times for suppliers, aren't illegal, but perhaps they should be. Small businesses are at the mercy of large ones. Over the last 50 years, there's been a lot of focus on protecting consumers from business but not enough on protecting small, vulnerable businesses from the power imbalance of dealing with large businesses. Small businesses don't have access to the capital and financial options larger companies do. Because of that, their cash flow is easily disrupted, and the experience of COVID-19 has certainly been an additional example of that.</p> <p>The Payment Times Reporting Bill before us today introduces a new payment-times reporting scheme that requires approximately 3,000 large businesses and government enterprises with an annual turnover of $1 million or more to publicly report biannually on their payment terms and practices for small business suppliers, the objective being the improvement of payment outcomes for small businesses through improved transparency. The government argues that this transparency will help small businesses to make better informed decisions about their potential customers. But, if you're a new manufacturer approaching a mining company who wants your product, are you really going to say no? What choice does a small business really have in who its customers are? If you're a photographer who is looking for some steady work, are you going to turn down a retail chain? Of course not. To put the onus on the small business to decide who their clients will be to achieve a fairness outcome for them is backwards. As I said, small businesses are at the mercy of larger ones, a cog in a supply chain, and are awaiting payment like everyone else.</p> <p>The bill before us is, unfortunately, purely about reporting. As was noted by the New Zealand Ministry of Business, Innovation and Employment in its discussion paper on improving business-to-business payment practices:</p> ~~<p class="italic">… it is very hard to establish whether disclosure regimes have any effect.</p>~~ <p>The government's legislation does not mandate maximum payment times to small business, nor does it provide for penalties or remedies on invoices that are paid late or with payment times greater than 30 days. The Australian Small Business and Family Enterprise Ombudsman welcomed the reporting framework as a step in the right direction. However, they note that the belief that small businesses can simply shop around for large business customers is deluded. This legislation, as identified by the regulation impact statement, is nothing more than a ticking-the-box exercise on a Liberal election commitment and an opportunity for that headline-grabbing 'backing small business' slogan. This bill differs little from the Business Council of Australia's current voluntary and unenforceable supplier payment code, a non-binding pledge to pay small businesses within 30 days of invoice. In fact, similar business reporting frameworks were drawn up back in the time of the Gillard government. So once again we see that this Liberal government is rocketing along with reform, just as in so many other areas!</p> <p>The Small Business and Family Enterprise Ombudsman, Kate Carnell, for example, welcomes the transparency this legislation will bring; however, she also notes that the payment times reporting framework is:</p> ~~<p class="italic">… one piece of the puzzle but it won't solve the problem of late payment times on its own.</p>~~ ~~<p class="italic">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.</p>~~ <p>The EU already requires this, and countries like New Zealand are moving harder and faster to a 20-day payment turnaround. We should be looking to follow in their footsteps. When it comes to supply chain financing, there has been significant conversation about that this year, particularly in the case of reverse factoring, in which contracted payment times are extended, sometimes to 120 days or more from the date of invoicing. In such instances, a large business will push out contracted payment times to smaller suppliers and offer a third-party financier who will pay the invoice earlier on their behalf but at a discount, meaning the small business effectively pays a fee to be paid on time.</p> <p>Rightfully, supply chain financing has attracted international regulatory scrutiny for obscuring the true debt position of firms using it. The Australian Competition and Consumer Commission have confirmed they are reviewing arrangements of some large firms' use of reverse factoring for breaching the Australian Consumer Law relating to unfair contract terms, misleading and deceptive conduct and/or unconscionable conduct. The Australian Securities and Investments Commission have also confirmed that they are investigating such arrangements in relation to auditing and financial reporting requirements.</p> <p>While this bill is a step in the right direction, it's not there yet. We have concerns about its efficacy and many shortcomings, and that's why it should be referred to the Senate Economics Legislation Committee for inquiry and review. It is Labor's belief that this review should focus on things like the objects clause, making it explicit that it's around motivating large businesses to pay their suppliers in less than 30 days. It should also look at the efficacy of the reporting regime and require reporting to parliament. It should look at the mechanisms to legislatively require large businesses to make payments to small businesses within a prescribed period of time. The EU has done this. Other countries have done this as well, and New Zealand is heading in that direction too. An inquiry can also look into the set-up and proper resourcing of the proposed new regulator under the bill and whether the elements of the proposed extensive use of delegated legislation via minister's rules is appropriate or it should instead be incorporated into the legislation itself.</p> <p>As I said before, we welcome this legislation. It does represent a step in the right direction. But, as it is now, it falls short, and we look forward to the outcomes of a future inquiry about how yet again we can improve the legislation coming from this government.</p> ~~<p class='motion-notice motion-notice-truncated'>Long debate text truncated.</p>~~

~~Andrew Wallace~~
Whether it's in the building industry or in the broader economy, some larger businesses have for many years exploited the vulnerabilities of those small businesses below them in the contractual chain. These are often mum-and-dad businesses. These small business owners work damn hard to provide for their families and in some cases struggle to keep their heads above water. These small family businesses are not asking for handouts. They just want to be paid the money they are owed for the work they were engaged to do—the work they did in fact perform. The statistics around payment times are very sobering. More than a third of small business invoices are paid after 30 days. These invoices take an average of 63 days to be paid. If all large businesses in Australia paid small businesses in 30 days, $7 billion in working capital would be transferred from large to small businesses, creating a net benefit to the economy of some $313 million each year. Only 80 out of 3,000 large businesses in Australia have signed up to the Business Council of Australia's voluntary supplier payment code in the three years since it began. It is simply not good enough that less than 0.3 per cent of large businesses have acknowledged this is a problem that needs to be addressed.
The Payment Times Reporting Bill 2020 requires large businesses and government enterprises with an annual income over $100 million to publish information on how and when they pay small businesses—that is, businesses with a turnover of under $10 million. From 1 January 2021, twice annually, around 3,000 large business will be required to produce a payment times report, including: the shortest and longest standard payment periods offered; the proportion of small business invoices paid in less than 21 days; those paid in between 21 and 30 days, between 31 and 60 days, and more than 60 days; the proportion of all procurement from small business suppliers; and, finally, their use of supply chain financing practices, which often force small businesses to accept a reduced amount if they want to be paid in a reasonable time. The provisions of the bill place a requirement on businesses that are incorporated, or have a physical presence in Australia, or are foreign businesses that carry on an enterprise in Australia that meets the income threshold, plus Commonwealth corporate entities and Commonwealth companies that meet the income threshold. Information from these reports will be made publicly available on a payment-times reports register for searching by small businesses or members of the public.
The majority voted in favour of keeping unchanged the usual [second reading motion](https://peo.gov.au/understand-our-parliament/how-parliament-works/bills-and-laws/making-a-law-in-the-australian-parliament/), which is "*that the bill be read a second time*" (parliamentary jargon for agreeing with the main idea of the bill).
This question was put after Gorton MP [Brendan O'Connor](https://theyvoteforyou.org.au/people/representatives/gorton/brendan_o'connor) (Labor) moved an amendment that would have removed all the words after 'that' and replaced them with other words (see below).
### Amendment text
> *That all words after "That" be omitted with a view to substituting the following words:*
>
> *"whilst not declining to give the bill a second reading, the House expresses concerns over deficiencies in the bill, including the:*
>
> *(1) lack of certainty that the measure will lower payment times;*
>
> *(2) light treatment of supply chain financing; and*
>
> *(3) ability for businesses to hide extremely long payment times to small businesses".*
The new requirements will be supported by a payment-times-reporting small business identification tool to assist corporates in identifying their small business suppliers. The bill establishes a payment-times-reporting regulator to monitor and enforce compliance. The regulator will have powers to obtain and publish information, to investigate and to enforce civil penalties, as well as direct an entity to undertake an audit of their payment practices. Significant penalties will be in place to ensure that large businesses comply with the scheme. Failure to report has a maximum penalty of 60 penalty units for an individual or 300 penalty units for a body corporate. Providing misleading information has a maximum penalty of 350 penalty units for an individual and 0.6 per cent of the total annual income for a body corporate.
Not only will this register shine a very bright light on the shadows of large businesses with poor payment practices, and thereby incentivise them to clean up their act, but small businesses, mum and dad family businesses, will be able to assess the payment performance of a larger business when deciding whether to do business with them. Information is key to small businesses when pricing in the prospect of late payment, and this bill will do just that. Recently, businesses like Rio Tinto and Telstra rapidly abandoned poor payment practices, once they were subject to public exposure. Their payment policies were quickly shortened so suppliers were paid within just 20 days.
Many people might be wondering what the federal government is doing in this regard. The federal government is leading the way, and leading by example, in relation to responsible payment times. Since July 2019, Commonwealth agencies have paid invoices for contracts up to $1 million within 20 calendar days, or they will pay interest on those late payments. This captures 95 per cent of procurement contracts entered into by the Commonwealth. In addition, from 1 January 2020 government agencies capable of e-invoicing have been paying e-invoices valued at up to $1 million within five days. If they don't, they pay interest. Commonwealth agencies will be progressively coming on board with e-invoicing capability throughout 2020. The Commonwealth is also developing a procurement policy where large businesses who tender for government contracts will be required to match the Commonwealth's 20-day payment policy. This is a game changer. The federal government is leading by example and I have no doubt that businesses, particularly those that deal with the federal government, will come on board. I commend the bill to the House.
~~Matt Keogh~~
Labor welcomes the debate on the Payment Times Reporting Bill 2020 and the Payment Times Reporting (Consequential Amendments) Bill 2020. We do so because we have long advocated for better payment practices to small business suppliers. We welcome these bills as a step in the right direction. From the outset, I emphasise that Labor supports the intent of this legislation as a first step in improving the payment practices of large businesses to their small business suppliers. As my colleagues and I, and indeed our fantastic candidate for Eden-Monaro, Kristy McBain, are all too aware, cash flow and prompt payment times are critical for small businesses.
Imagine you've kicked off your own small business, manufacturing a product, and you score a contract with a mining giant to supply a critical part. You think you've hit the big time. You really think you've struck it lucky. But then that mining giant tells you that it will pay you what it owes in 60 days, and then maybe 90 days, but maybe that can be sped up if you can cut them some slack and trim down the invoice to a more palatable amount. You're out of pocket for the product, the labour and the materials, but they're a much bigger organisation than you. What can you do? You can't get your big first major client offside, but you also can't afford not to be paid. You cop the wait.
Imagine, perhaps, that you're a sole trader, a photographer taking shots for some of the nation's biggest retail chains. You spend hours—days, in fact—preparing, shooting, editing and re-editing the images. You've perhaps said no to smaller jobs in order to get this big one done. Then these retailers tell you that they'll pay you in 90 days or so, and then they say: 'Actually, can we make that 120? Surely you understand COVID is rough and we don't have the cash flow to pay your invoice at the moment.' You feel like you're propping up their ASX listed business at the expense of your own microbusiness, helping keep their heads above water while drowning yourself. But once again you don't have a choice. You don't want to say anything for fear of losing future work from them. You bite your tongue. After all, what they are doing isn't illegal. You're the little guy. You'll just have to wait it out.
The practices of reverse factoring, or pushing out payment times for suppliers, aren't illegal, but perhaps they should be. Small businesses are at the mercy of large ones. Over the last 50 years, there's been a lot of focus on protecting consumers from business but not enough on protecting small, vulnerable businesses from the power imbalance of dealing with large businesses. Small businesses don't have access to the capital and financial options larger companies do. Because of that, their cash flow is easily disrupted, and the experience of COVID-19 has certainly been an additional example of that.
The Payment Times Reporting Bill before us today introduces a new payment-times reporting scheme that requires approximately 3,000 large businesses and government enterprises with an annual turnover of $1 million or more to publicly report biannually on their payment terms and practices for small business suppliers, the objective being the improvement of payment outcomes for small businesses through improved transparency. The government argues that this transparency will help small businesses to make better informed decisions about their potential customers. But, if you're a new manufacturer approaching a mining company who wants your product, are you really going to say no? What choice does a small business really have in who its customers are? If you're a photographer who is looking for some steady work, are you going to turn down a retail chain? Of course not. To put the onus on the small business to decide who their clients will be to achieve a fairness outcome for them is backwards. As I said, small businesses are at the mercy of larger ones, a cog in a supply chain, and are awaiting payment like everyone else.
The bill before us is, unfortunately, purely about reporting. As was noted by the New Zealand Ministry of Business, Innovation and Employment in its discussion paper on improving business-to-business payment practices:
~~… it is very hard to establish whether disclosure regimes have any effect.~~
The government's legislation does not mandate maximum payment times to small business, nor does it provide for penalties or remedies on invoices that are paid late or with payment times greater than 30 days. The Australian Small Business and Family Enterprise Ombudsman welcomed the reporting framework as a step in the right direction. However, they note that the belief that small businesses can simply shop around for large business customers is deluded. This legislation, as identified by the regulation impact statement, is nothing more than a ticking-the-box exercise on a Liberal election commitment and an opportunity for that headline-grabbing 'backing small business' slogan. This bill differs little from the Business Council of Australia's current voluntary and unenforceable supplier payment code, a non-binding pledge to pay small businesses within 30 days of invoice. In fact, similar business reporting frameworks were drawn up back in the time of the Gillard government. So once again we see that this Liberal government is rocketing along with reform, just as in so many other areas!
The Small Business and Family Enterprise Ombudsman, Kate Carnell, for example, welcomes the transparency this legislation will bring; however, she also notes that the payment times reporting framework is:
~~… one piece of the puzzle but it won't solve the problem of late payment times on its own.~~
~~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.~~
The EU already requires this, and countries like New Zealand are moving harder and faster to a 20-day payment turnaround. We should be looking to follow in their footsteps. When it comes to supply chain financing, there has been significant conversation about that this year, particularly in the case of reverse factoring, in which contracted payment times are extended, sometimes to 120 days or more from the date of invoicing. In such instances, a large business will push out contracted payment times to smaller suppliers and offer a third-party financier who will pay the invoice earlier on their behalf but at a discount, meaning the small business effectively pays a fee to be paid on time.
Rightfully, supply chain financing has attracted international regulatory scrutiny for obscuring the true debt position of firms using it. The Australian Competition and Consumer Commission have confirmed they are reviewing arrangements of some large firms' use of reverse factoring for breaching the Australian Consumer Law relating to unfair contract terms, misleading and deceptive conduct and/or unconscionable conduct. The Australian Securities and Investments Commission have also confirmed that they are investigating such arrangements in relation to auditing and financial reporting requirements.
While this bill is a step in the right direction, it's not there yet. We have concerns about its efficacy and many shortcomings, and that's why it should be referred to the Senate Economics Legislation Committee for inquiry and review. It is Labor's belief that this review should focus on things like the objects clause, making it explicit that it's around motivating large businesses to pay their suppliers in less than 30 days. It should also look at the efficacy of the reporting regime and require reporting to parliament. It should look at the mechanisms to legislatively require large businesses to make payments to small businesses within a prescribed period of time. The EU has done this. Other countries have done this as well, and New Zealand is heading in that direction too. An inquiry can also look into the set-up and proper resourcing of the proposed new regulator under the bill and whether the elements of the proposed extensive use of delegated legislation via minister's rules is appropriate or it should instead be incorporated into the legislation itself.
As I said before, we welcome this legislation. It does represent a step in the right direction. But, as it is now, it falls short, and we look forward to the outcomes of a future inquiry about how yet again we can improve the legislation coming from this government.
~~Long debate text truncated.~~