Regulation Impact Statement Updates

Official website for publishing regulatory impact analysis information for regulatory decisions announced by the Australian Government, COAG and COAG Councils.

Payment Times Reporting Scheme

Aust Gov
22nd May 2020

Regulation Impact Statement – Department of Industry, Science, Energy and Resources

On 13 May 2020, the Australian Government introduced legislation to establish a Payment Times Reporting Scheme, which would require qualifying entities (large businesses with more than $100 million annual turnover) to report on their payment performance to small businesses (defined as businesses with a turnover of up to $10 million per annum). Introducing the scheme was an election commitment.

The RIS identified that long payment times from large to small businesses are a significant issue in Australia. In 2017–18, payments from large to small businesses were worth around $281 billion, with around $77 billion of payments paid later than 30 days. The cashflow and financing pressures arising from longer payment times in turn constrain small businesses’ ability to hire, invest and grow – and are associated with higher bankruptcy and exit rates.

The RIS examined the option of introducing a mandatory Payment Times Reporting Scheme. Compared to the status quo, the RIS provides evidence that introducing the scheme is the equivalent of transferring working capital from large to small businesses, and has a net economic benefit. The difference in the cost and ability to access financing between large and small businesses, means that normalising 30 day payment times from large to small businesses produces a net benefit to small businesses of $522 million per year and $4,319 million over 10 years. It creates an estimated overall net benefit to the Australian economy of $313 million a year and $2,591 million over 10 years.

The Office of Best Practice Regulation (OBPR) assessed the Regulation Impact Statement (RIS) prepared by the Department of Industry, Science, Energy and Resources as compliant with the Government’s requirements but not consistent with best practice. The OBPR considers that the policy development process as described in the RIS departs from best practice as the RIS was not prepared in time to inform each major decision point. More details are provided in the OBPR’s assessment advice (link to below) to the Department of Industry, Science, Energy and Resources.

The RIS estimates the average annual regulatory costs at $22.5 million. The OBPR has agreed to the regulatory costs.

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