There’s considerable reform occurring at the federal level affecting self-employed, small business people. This is all positive ‘stuff’.
Paying Small Business on time
From 1 January 2021, businesses with more than $100 million in turnover must report to a central government database their small business supplier payment terms and practices. We understand that the information will be publicly available. Next year we expect to see legislation where if a large business does not pay small business on time, the large business will lose access to government contracts. The reporting scheme is important for this. These are major moves to stop large businesses using small businesses as ‘banks’.
Beefing up unfair contract laws
In 2016 large businesses were required to have ‘fair’ contracts with small businesses. What is ‘unfair’ under the law is common sense. See here. But the laws were weak on enforcement and now the federal government has achieved agreement from all the state and territory governments to ‘beef up’ the laws. This is a significant development.
- Currently, unfair terms are ‘null and void’. Now unfair terms will be ‘unlawful’.
- Financial penalties will now apply.
- The definition of small business is expanded.
- Clarifying what is a standard form contract.
- Currently, the law only applies to contract up to $300,000. Now there will be no limit.
Big businesses have bought these tougher laws on themselves. Too many large businesses have ignored the laws. Now the laws will have real teeth.
Small business insolvency
Following the Covid disaster, many small businesses will collapse or have collapsed. The federal government is changing insolvency laws for small business. This will give small business people a better chance to turn their businesses around or to retain some control of the situation during the insolvency process. For too long some insolvency practitioners have simply ripped out the value of a failed business to fund the insolvency practitioner’s business. The new laws are broadly designed around the US ‘Chapter 11’ insolvency laws.
These individual reforms are important but as a package are hugely important. If small businesses and self-employed people are to rebuild after the Covid-induced huge downturn, these reforms are doubly important. We congratulate the government on these moves.
There is more reform in the pipeline and we’ll talk about it in the coming weeks.