The Morrison Government is delivering a big win for small businesses providing services to government. From 1 July the new Payment Times Procurement Connected Policy will improve payment times for the suppliers of government contracts. The policy’s primary aim is to improve payment times and cash flow across the Australian economy.
Under the policy, businesses with an annual income of more than $100 million that are awarded government contracts of over $4 million will be required to pay suppliers’ invoices (of up to $1 million) within 20 calendar days, or face interest penalties.
The change complements the Morrison Government’s policy to pay its suppliers on time and is in line with the its commitment to give small businesses greater confidence when it comes to cash flow.
Large businesses in scope of the Payment Times Procurement Connected Policy will also be required to report their payment terms and practices under the Payment Times Reporting Scheme, increasing transparency of payment times from large to small suppliers.
Minister for Employment, Workforce, Skills, Small and Family Business Stuart Robert said the policy would help improve the payment times for suppliers in the supply chains of government contracts of up to 100 Commonwealth agencies.
"Late payments are a significant issue in Australia and it’s an issue that disproportionately impacts smaller businesses. Dealing with it is in all our interests and improving payment times will help these businesses prosper, grow and employ more Australians," Minister Robert said.
"The Federal Government is leading by example in paying contracts up to $1 million quickly, as we should and we are now setting that standard for large businesses that receive Commonwealth contracts."
Minister for Finance Simon Birmingham said small and medium-sized enterprises (SMEs) represented 51.6 per cent of Commonwealth contracts by number in 2019-20 and 25.2 per cent by value.
Minister Birmingham said to increase SME representation in government contracts, a new exemption has been in place since December last year to allow Commonwealth agencies to directly engage SMEs for the procurement of goods and services valued up to $200,000.
"This will reduce red tape for SMEs and deliver value for money for the Commonwealth," Minister Birmingham said.
The Payment Times Procurement Connected Policy Guidelines are now available at https://treasury.gov.au/publication/p2021-183909, assisting large businesses and government agencies to understand their rights and responsibilities under the policy.
The Payment Times Procurement Connected Policy will be fully implemented from 1 October 2021.