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Proposed reforms to improve small business payment times will allow the government to publicly denounce around 1,500 businesses, an employer group predicts.
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Power to name and shame late payers is excessive, biased: Ai Group
03 May 2024
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10 minute read
A top employer group has pushed back against reforms to improve payment times for small businesses, arguing the government’s proposed name-and-shame powers are unnecessary, biased and would “excessively” apply to 1,500 businesses.
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Ai Group also warned the privacy of reporting businesses could be compromised under proposed provisions to allow the payment times regulator to share information between government agencies without adequate safeguards.
In a submission in response to the Treasury’s draft legislation amending the Payment Times Reporting Act, the group said provisions to name and shame late-paying businesses had an “excessive scope” and were unnecessary as no other area of regulation gave such powers to the government.
Chief executive Innes Willox called the proposed power “heavy-handed and not the right answer”.
"Proposed amendments to the act need further refinement to get the balance right between carrots and sticks,” he said.
Ai Group drew comparisons to the Women’s Gender Equality Agency dashboard as a similar reputation-based scheme, arguing the fact the government did not publicly name worst-performing employers meant there was “no reason why payment times warrant this directive power”.
Based on data from the most recent reporting period, Ai Group predicted that approximately 1,500 businesses would be named and shamed under the regime’s definition of “slow payers of small businesses”.
The definition forces any reporting entity that falls within the bottom 20 per cent of small business payers to publish a “slow small business payer direction” on their website and other documents, with their status also recorded on the late payments register.
“These powers are poorly defined, too discretionary, and don't fix the actual problem,” Willox said.
“The government's proposed changes … need more balance if they are to genuinely improve outcomes for small business.”
Ai Group also said the plan to single out the bottom 20 per cent of reporting entities would result in selection bias, disproportionately applying to those in project-interdependent industries and failing to capture poor performers in transactional industries.
“It is highly likely that any aggregated ranking approach will result in selection bias towards certain industries, rather than genuinely identifying entities with poor payment times performance,” the employer group said.
Concerns were also raised around the lack of safeguards around the payment times regulator’s use and sharing of protected information between government agencies.
“Any protected information sharing provisions in the act should, at a minimum, implement the same level of safeguards and limitations on inter-agency disclosure as seen in relevant comparable forms of legislation,” it said.
The government has pursued the reforms following a review of the Payment Times Reporting Act last year which found the regime was “impenetrable” and “poorly functioning”.
Small business advocates believe the long-awaited name-and-shame approach, first proposed in 2018 by the Morrison government, is necessary to alter the behaviour of more powerful businesses at the top end of town.
“If the bottom dwellers aren’t lifting their game there needs to be some way in which that’s visible,” Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Bruce Billson told Accountants Daily last year.
Minister for Small Business Julie Collins said the reforms would “level the playing field” and help with small business cash flow while reducing administrative burdens and financing costs.
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