Amanda Stoker (Queensland, Liberal Party) Share this | Link to this | Hansard source

Before question time, I began to tell the story of a tradesman from the Gold Coast. His name's Mark. His business is one in which he has hired apprentices and trained them through to being tradesmen themselves. He has taken on subbies and held them for years. He's employed tradesmen. He's grown a business that contributes meaningfully to the community around him. His business works for head builders in residential construction. He's a contractor. But, even though his name might not be on the signs at the front of the homes that he contributes to building, he's really proud of what he does. In his career, he has seen the industry go up and he's seen it go down. He's seen it ride out the recession we had to have, so called by a former Prime Minister, and he went through the great hardship of that late eighties and early nineties period and prospered throughout the late nineties and through the early noughties.

He has some important feedback for the people who work in this chamber to take into account, and that is that whenever times get tough, whenever cash flow is tight, as a contractor it's always those further down the chain who bear the brunt. Too many times he has been on the receiving end of a situation where the residential builder to which he is contracted has extended out the payment period for bills that he's owed, little by little, until 30-day terms have become 60-day terms, 90-day terms or 120-day terms—without consent, of course. Never were the terms the subject of a consent to that kind of extension. Then, sadly, he can find that the builder goes under, taking with it, sometimes, hundreds of thousands of dollars. But, even when it's less than that, even when it's in the realm of tens of thousands of dollars, the hit to his business has been huge and, with it, has risked the livelihoods of every person who works for him.

It's put his house on the line. He tells the story of more than once being in a position where he and his wife had to be in regular contact with the bank to try and negotiate more time for payments because there just isn't any more room left to wiggle. He knows how very hand to mouth many of the people who have worked for him have lived. He has known how difficult it has been for them to bear it when cash flow gets squeezed in his business because of the manipulations of those further up the chain.

The Morrison government cares about people like Mark, listens to their stories and is prepared to act. The Morrison government recognises that cash flow is a key issue for small businesses like Mark's. I find, in my office, I am getting concerns constantly raised with me about the payment practices of bigger businesses, because businesses at the small end of the spectrum have staff wages, rent and other overheads that all have to go out and all have to be paid. A lot of them have a code of great honour about making sure they pay their bills on time, but it leaves them in a vulnerable position when those with greater means—those with bigger overdrafts, shall we say—don't do the right thing.

Ultimately, the time that small business owners have to spend chasing up bills to get paid is time that they're not investing into doing their job well, time they're not investing in training their apprentices and time they're not investing in the future growth of their enterprise. So this bill is really important. This bill means that there is a requirement for businesses with a total annual income of over $100 million—at that bigger end of the spectrum—to publish information about how and when they pay small businesses. So when the head contractor for Mark extends the time for paying his bills from the agreed term of 30 days to 60, that will be on the public record. When it's extended further, that too will be the subject of reporting.

Some people will say that doesn't go far enough—that reporting isn't enough to help someone like Mark; reporting alone won't solve this problem. I take on board that concern, but the idea of having transparency about how people are conducting themselves is twofold. It means a contractor like Mark knows what they're getting into when they start working for a business, and they can make an informed choice about whether that's the kind of business with whom they want to deal. Some might say that they don't always have a whole lot of choice about these things; sometimes they've got to take whatever work is on offer. I accept that too, but the way this reporting mechanism will make a big difference to people like Mark is that when that head contractor wants to tender for Commonwealth work, the fact of their good or bad reporting record will be a relevant consideration in whether or not they should be brought on board. It's a way that the Commonwealth can lead by paying its bills on time—one very important measure—and also by selecting people with whom to deal whose business practices reflect the values of the small business people in the community that we are here to fight for. I think that's significant.

We know that long payment times hurt small businesses. It stops them from being able to have the certainty of cashflow that means they can take a punt on a new member of staff. It stops them from being able to make significant investments. There's a flow-on effect across the economy when these kinds of practices are engaged in. If we can speed up the process of people getting paid so that it's done in a more timely way, the benefits are compounding throughout the economy.

There's another criticism that's potentially able to be made about this regime: if businesses at the top end of the spectrum aren't doing the right thing and aren't paying people on time, let's not just demand reporting; let's make it a requirement that they pay on time. I've heard that argument made by some in the community, but we have the benefit of observing the experience of the imposition of requirements like that in other jurisdictions. Some countries in Europe have introduced a requirement at law that a business must pay within 60 days. At first glance, again, that might sound good, but that had a perverse effect in many ways. It had the effect of making all of those businesses who were paying faster than that—say, at 30 days—change the norms by which they did business and to think that all they really had to do was 60 days. So keeping it flexible, keeping it based on reporting and staying away from imposing an inflexible hard requirement not only allows for the improvement of standards on something more of a voluntary basis but also avoids that perverse effect of providing a disincentive to those businesses who want to pay more swiftly.

So I commend this bill. It's a way of improving the norms by which people do business. It's a way of providing transparency for those businesses that do the right thing and a way of naming and shaming those who do the wrong thing. It's a way of giving tradesmen like Mark ever-improving cashflow, certainty about the bodies with whom they are doing business and optimism that they can expect consistency in the business practices in the market in which they deal so that they have the confidence they need to be able to take on more apprentices, train more staff and invest in the future of their industry. That's something from which we will all benefit.

Louise Pratt (WA, Australian Labor Party, Shadow Assistant Minister for Manufacturing) Share this | Link to this | Hansard source

I also welcome the Payment Times Reporting Bill 2020. It is a step in the right direction to support the cashflow of small business in our nation. It's a small step in the right direction, but Labor believes it could be—and it can be with the right amendments—a much better and stronger step to support cashflow for small business.

We know that the bill before us puts in place a reporting scheme requiring around 3,000 large businesses and government enterprises with turnovers of $100 million and above to report biannually on their payment terms and practices for their small business suppliers. 'Small business' will be defined as businesses with less than $10 million in turnover, and a small business identification tool will be created to assist larger businesses identifying their small business suppliers.

We have heard the government argue, just as Senator Stoker argued in speaking before me, that the purpose of the scheme is to improve payment times for small businesses by making the payment times for practices of larger businesses more transparent. They've argued that transparency is an adequate measure to create cultural change and put pressure on payment time practices in our nation. I acknowledge the consideration that the government might have given to the flaws of overseas schemes that have regulated and mandated payment times, but I think we can and should be a little bit cleverer than that here in the way we legislate on those questions.

This bill puts in place a regulator appointed by the Secretary to the Department of Industry, Science, Energy and Resources. That regulator publishes the reporting entity reports or payment times on an essential public register that will be known as the Payment Times Reports Register. That register will include aggregated data on the reporting entities—larger businesses' payment terms and practices of that identifying entity.

Reporting is supposed to begin in January next year, and entities that fail to maintain payment records or provide false information may contravene a civil penalty provision. So that is essentially only a transparency measure, and I don't think that's going to be enough to support small business in Australia. As we've heard in the evidence before the Senate inquiry, there are many companies that simply don't mind what their public reputation is regarding these matters. They actually just leverage off their market control as large companies. They're able to dictate long payment time terms. Even if that's not what is written on the original contract or invoice, they dictate and move to those long payment times, because they can simply afford to string small businesses along because those large businesses are not as dependent on the small businesses as the small businesses are on the larger businesses.

We on this side of the chamber are very concerned about what is, frankly, a light touch when it comes to the nature of payment times and their importance to small business. We very much understand cashflow, the survival of small business and how critical prompt payment times are. Small businesses need healthy cashflow. Without good cashflow, we are seeing small businesses already experience much higher interest rates from banks, whereas larger businesses have more capacity to raise capital and juggle their finances around.

Unfortunately, despite the financial flexibility of larger businesses, in Australia we have seen some firms take advantage of smaller businesses to boost their own working capital. Indeed, the small business ombudsman gave us evidence of some international companies that simply said that it wouldn't really matter what they were forced to report through a regime like this. The overseas company has international policy settings, and they will mandate what those payment times are—and they can be up to as long as 180 days. So transparency will do diddly squat, really, to manage payment times where there is an overseas business which mandates the long payment times so they can leverage profits out of it at the expense of small business.

Some payment times are indeed unconscionably long: 180 days or more. When coupled with the practice of supply chain financing, or reverse factoring, these long payment times become even more obscene in the sense that small businesses who have been forced into 180-day payment times have asked why that should be legal and why anything hasn't been done to stop it, and then they end up being victims of supply chain financing or reverse factoring. They end up taking a discount on the money that they're owed by the company to which they supplied simply in order to get paid on time or to get paid in a reasonable length of time. Behaviour like this is simply unacceptable. Labor has said this for a long time, and we don't believe that this legislation goes nearly far enough in fixing the issue.

The member for Fenner, my colleague in the other place, said back in 2016: 'The reason these large companies are squeezing suppliers is simple: it improves their cash flow and makes them money. Even in the current low-interest-rate environment, there's money to be made from taking your time to pay up. The reason firms can get away with longer payment terms is straightforward: the reason they get away with it is they're big companies.' That was back in 2016. During the COVID crisis we've heard about even further egregious behaviour by large companies, such as Premier Retail and The Just Group. They have unilaterally extended payment terms for up to 180 days, which is six months. That's six months in an environment where small businesses might be struggling and already have their backs against the wall. The Just Group, run by Solomon Lew, is particularly offensive to smaller businesses, given that at this time Solomon Lew told landlords that they wouldn't pay rent but they've accessed JobKeeper and they've reported record profits for the financial year. These are some of the companies who extend payment times simply because it makes them extra profits. When we bring reverse factoring into that, payment times are blown out well beyond 30 days, and third-party financiers steps in—oh!—to save the day and pay the bill on time, but at a discount. In other words, small businesses must pay to be paid on time.

These practices are outrageous and there is nothing in this bill that actually prevents them. What's to stop someone saying, 'Oh, yes, we paid your bill on time; it's here that the bill is paid and we reported that it was paid on time'? But was it fully paid on time or was it paid with reverse factoring inside it so the small business didn't receive what they were owed? In the bill, the definition of 'supply chain financing' and the associated reporting requirements are contained in the minister's rules. The draft rules require a large entity to report on whether they use supply chain financing and to detail those arrangements and the proportion of invoices paid under such arrangements.

We might not know, through this so-called transparency scheme, exactly how much of a loss small businesses have faced in order to get their invoices paid on time. I think it's certainly problematic, that the only reference to supply chain finance is this passing reference to what the minister may include in the rules. We have no guarantee that a minister won't remove requirements to report on the use of such arrangements on the whim of or due to pressure from proponents of supply chain finance. Along with those that I've already outlined, Labor's primary concern is simply that transparency—

Debate interrupted.