Matt Keogh (Burt, Australian Labor Party, Shadow Minister for Defence Industry) Share this | Hansard source

by leave—I move together non-government amendments (1) to (6) circulated in my name:

(1) Clause 3, page 2 (line 23), after "practices", insert ", including paying small business suppliers in less than 30 days".

(2) Clause 5, page 5 (after line 23), after the definition of notifiable event, insert:

payment time,for an invoice, means the number of days in the period beginning on the day a small business supplier issued the invoice to the reporting entity and ending on the day that the invoice was paid in full.

(3) Clause 5, page 6 (after line 3), after the definition of protected information, insert:

recalcitrant reporting entity means a reporting entity declared under subsection 37B(5) to be a recalcitrant reporting entity.

(4) Clause 14, page 13 (after line 30), after subclause 14(1), insert:

(1A) The report must also:

(a) state the median payment time for all small business invoices paid by the entity during the reporting period; and

(b) state the average payment time for all small business invoices paid by the entity during the reporting period.

(5) Page 25 (after line 15), at the end of Division 2 of Part 4, add:

30A Role of the Australian Small Business and Family Enterprise Ombudsman

(1) To avoid doubt, nothing in section 30 limits the operation of the Australian Small Business and Family Enterprise Ombudsman Act 2015.

(2) The Ombudsman may inform the Regulator of an alleged contravention of this Act by a reporting entity either:

(a) at the request of a small business supplier; or

  (b) if the Ombudsman has otherwise become aware of an alleged contravention.

(3) Within 30 days of being informed of an alleged contravention under subsection (2), the Regulator must respond to the Ombudsman to advise:

(a) if the Regulator decides to take action in relation to the alleged contravention—of the Regulator's findings in relation to the alleged contravention and the action that the Regulator intends to take; or

(b) if the Regulator decides not to take action in relation to the alleged contravention—of the Regulator's findings in relation to the alleged contravention and the reasons that the Regulator has decided not to take action; or

(c) that the Regulator has required the reporting entity to appoint an auditor to carry out an audit in relation to the entity's compliance with this Act under subsection 30(2) but:

  (i) the entity has not yet given the Regulator a written report setting out the results of the audit; or

  (ii) the Regulator has otherwise not yet made a decision on what action the Regulator intends to take in relation to the alleged contravention; or

(d) that the Regulator is using or has used:

  (i) the Regulator's monitoring powers under Part 2 of the Regulatory Powers Act; or

  (ii) the Regulator's investigatory powers under Part 3 of the Regulatory Powers Act;

in relation to the alleged contravention but has not yet made a decision on what action the Regulator intends to take; or

  (e) that the Regulator has otherwise not yet made a decision on what action the Regulator intends to take and the reason that the Regulator has not yet made a decision.

(4) If the Regulator responds to the Ombudsman under paragraph 30A(3) (c) or (d) the Regulator must also inform the Ombudsman, as soon as practicable after the Regulator decides to take, or not to take, action in relation to the alleged contravention, of the Regulator's findings in relation to the alleged contravention and:

(a) if the Regulator decides to take action—the action that the Regulator intends to take; or

  (b) if the Regulator decides not to take action—the reasons that the Regulator has decided not to take action.

(5) If the Regulator advises the Ombudsman under paragraph 30A(3) (e) that the Regulator has not yet made a decision on what action the Regulator intends to take, the Regulator must inform the Ombudsman, at intervals of no longer than 30 days until the Regulator has responded to the Ombudsman under any of paragraphs 30A(3) (a) to (d), of the reason that the Regulator has still not made a decision.

(6) In this section, Ombudsman means the Australian Small Business and Family Enterprise Ombudsman established under the Australian Small Business and Family Enterprise Ombudsman Act 2015.

(6) Page 33 (after line 23), after Part 4, insert:

Part 4A—Payment times failsafe mechanism

Division 1—Introduction

37A Simplified outline of this Part

This Part creates a payment times failsafe mechanism that is intended to provide an incentive for reporting entities to collectively improve their payment practices or run the risk of more stringent regulation.

The Regulator is required to report to the Minister after each reporting period after the first 3 reporting periods on the median and average times taken by all reporting entities to pay small business invoices.

The payment times failsafe mechanism is triggered if, after the first 6 reporting periods, the median of the median times reported by all reporting entities to pay small business invoices for a reporting period is more than 30 days. The Regulator must report this fact to the Minister.

Once the payment times failsafe mechanism has been triggered the Regulator must declare any reporting entity that has a median payment time for small business invoices of more than 30 days during a reporting period to be a recalcitrant reporting entity.

A recalcitrant reporting entity is required to pay all small business invoices within 30 days and is liable to a civil penalty if it fails to do so. The rules may provide for exemptions from this requirement.

Division 2—Late payment penalty

37B Payment times failsafe mechanism

Report on median and average payment times

(1) As soon as practicable after the end of 3 reporting periods after the commencement of this Act and, subsequently, after the end of each reporting period, the Regulator must give the Minister a report that states:

(a) the reporting period or reporting periods to which it relates; and

(b) the number of reporting entities that submitted a payment times report or payment times reports to the Regulator relating to the reporting period or reporting periods; and

(c) the median of the median payment times reported by all reporting entities that submitted a payment times report or payments times reports to the Regulator relating to the reporting period or reporting periods; and

(d) the average payment time for all reporting entities that submitted a payment times report or payment times reports to the Regulator relating to the reporting period or reporting periods.

(2) The Minister must cause a copy of a report to be tabled in each House of the Parliament within 5 sitting days of receiving it.

When the payment times failsafe mechanism is triggered

(3) The payment times failsafe mechanism is triggered if, after the end of 6 reporting periods after the commencement of this Act, the median of the median payment times under paragraph (1) (c) for a reporting period is more than 30 days.

(4) The report given to the Minister by the Regulator under subsection (1) in relation to the reporting period in which the payment failsafe mechanism was triggered, and each subsequent report given to the Minister in relation to subsequent reporting periods, must contain a statement that the payment times failsafe mechanism has been triggered.

Declaration that a reporting entity is a recalcitrant reporting entity

(5) If the payment times failsafe mechanism has been triggered, the Regulator must declare that a reporting entity is a recalcitrant reporting entity if:

(a) the entity is not a volunteering entity; and

(b) the entity's median payment time was more than 30 days during:

  (i) the reporting period in which the payment times failsafe mechanism was triggered; or

  (ii) any subsequent reporting period.

(6) The Regulator must write to a recalcitrant reporting entity as soon as practicable after the Regulator has made a declaration under subsection (5) in relation to the entity to inform the entity of the declaration and of the entity's obligations under subsection (8).

(7) A declaration by the Regulator under subsection (5):

(a) is not a legislative instrument; and

(b) has effect for a period of 2 years beginning on the day the declaration is made.

Recalcitrant reporting entities to pay small business invoices within 30 days

(8) A recalcitrant reporting entity must pay a small business invoice in full before the end of the period of 30 days beginning on the day the invoice is issued.

(9) Subject to subsection (10), the rules may provide that the requirement in subsection (8) does not apply in relation to a specified entity or specified entities either generally or in specified circumstances.

Note: An entity that wishes to rely on an exemption in the rules in relation to a contravention of a civil penalty provision bears an evidential burden (see section 96 of the Regulatory Powers Act).

(10) Rules may only be made for the purposes of subsection (9) after the payment times failsafe mechanism has been triggered.

Civil penalty

(11) A reporting entity is liable to a civil penalty if:

(a) the entity is a recalcitrant reporting entity; and

(b) the entity fails to comply with the requirement in subsection (8); and

(c) the entity has not been exempted from the requirement in subsection (8).

Civil penalty: 350 penalty units.

(12) For the purposes of subsection (11), the reference in paragraph 82(5) (a) of the Regulatory Powers Act to 5 times the pecuniary penalty specified for the civil penalty provision has effect as if it were a reference to 0.6% of the total income for the person for the income year in which the contravention occurred.

Note: This subsection modifies the maximum pecuniary penalty that a body corporate can be ordered to pay for a contravention of subsection (11).

I will briefly note why we are debating the Senate amendments to the Payment Times Reporting Bill 2020 in the House today. Despite professing urgency in regard to this bill's passage, at the end of the last sitting, the government prioritised ramming through its Abbott-era environmental laws without proper parliamentary scrutiny. As a result, the House has not until now had an opportunity to debate, let alone agree to, this bill as amended by the Senate.

In the Senate, we supported the government's statutory review in its amendment and we supported Senator Hanson's amendment to ensure certain matters are considered by the review. While we believe the fail-safe mechanism is the only feasible way to reduce payment times in this parliament, we didn't object to the stronger terms of reference being imposed on a statutory review. Nevertheless, we should take this opportunity to note that such a review with the terms added by Senator Hanson would actually help fine-tune a fail-safe mechanism before it was set to begin, as in the amendment moved in the Senate by Senator Farrell. In the time between the last sittings and this moment, I hope the government has reflected on its opposition to our proposal and the commentary by small-business stakeholders in support of it. After all, this proposal has real-world consequences.

Imagine you've kicked off your own small business manufacturing a product and you've scored a contract with a major mining company to supply a critical part. You think you've hit the big time, but then that mining giant tells you that it will pay you what it owes in 60 days, and then maybe in 90 days, but that maybe that can be sped up if you can cut it 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 first big, major client offside, but you also can't afford to not be paid. You cop it and wait.

Imagine, perhaps, that you're a sole trader—a photographer taking shots for some of the nation's biggest retail chains. You spent hours—days—on the project. You've perhaps said no to smaller jobs in order to get this big one. Then these retailers tell you that they'll pay you in 90 days or so, and then it's pushed out to 120. You're taking a hit so that their cash flow will benefit. You feel like you're propping up their ASX listed business at the expense of your own microbusiness, helping keep their head above water while you yourself are drowning. But, once again, you don't have a choice. You're the little guy; you'll just have to wait it out.

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 imbalances of dealing with larger ones. Small businesses don't have access to the working capital and financial options that larger companies do. Because of that, their cash flow is easily disrupted, and the experience of COVID-19 has certainly seen an additional example of how that can occur.

The amendments moved in my name seek to amend the amendments passed by the Senate, to include Labor's fail-safe mechanism. For the benefit of the House, Labor believes that this complementary backup measure is necessary to ensure the Payment Times Reporting Scheme improves general payment times for small business. Our amendment would introduce a fail-safe mechanism. This means that over the next few years, if the government scheme does not broadly improve payment times to small businesses to 30 days or less, then the mechanism will be triggered. The fail-safe mechanism can be triggered after three years of the scheme operating and will allow the regulator to force large businesses not paying small businesses on time to pay them within 30 days or face hefty fines. This will provide an incentive for reporting entities to collectively improve their payment practices or run the risk of more stringent regulation.

The fail-safe mechanism has the following features. The regulator will be required to report to the minister after each reporting period, with the reports being tabled in both houses of parliament. This will start after the first three reporting periods of the scheme—18 months after the commencement. The payment time fail-safe mechanism is triggered if, after the first six reporting periods of the scheme, the representative time to pay small business reported by all reporting entities is more than 30 days. The regulator must report this fact to the minister. Once the payment time fail-safe mechanism has been triggered, the regulator must declare any reporting entity that had a median payment time for small business invoices of more than 30 days for that reporting period to be a recalcitrant reporting entity. A recalcitrant reporting entity is required to pay all small business invoices within 30 days for two years and is liable for a civil penalty if it fails to do so. The rules may provide for exemptions from this requirement.

In effect, the self-regulatory incentive is that if, within three years of the transparency scheme operating, large businesses are not generally paying small businesses in 30 days or less then the firms not doing so will be mandated to do so. I want to be clear about why we aren't proposing to mandate 30-day payment terms across the board from the get-go. Labor understands there are rare instances where particular industries or business relationships may have longer or staggered payment times that are reasonable or fair. Some witnesses also noted in the inquiry that a blanket maximum 30-day payment term may incentivise— (Time expired)

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