Bills

Late Payment of Government Debts (Interest) (Automatic Payment of Interest) Amendment Bill

Introduction and First Reading

The Hon. R.I. LUCAS (Treasurer) (11:32): Obtained leave and introduced a bill for an act to amend the Late Payment of Government Debts (Interest) Act 2013. Read a first time.

Second Reading

The Hon. R.I. LUCAS (Treasurer) (11:33): I move:

That this bill be now read a second time.

Businesses complain about the late payment of bills by South Australian government departments. While invoice payment performance is generally at an acceptable level there is still substantial opportunity for improvement. The late payment of invoices can cause cash flow issues for businesses and negatively impact on their ability to meet financial commitments.

As part of the 2018 state election the government committed to make interest automatically payable to businesses for any undisputed invoice paid 60 days late where certain criteria are met, and to create greater accountability and transparency through the public reporting of invoice payment performance. The Late Payment of Government Debts (Interest) Act 2013 is limited in its application to small business, and requires an unnecessary and costly bureaucratic process in order for late payment interest to be claimed. As a result, there have been almost no interest claims submitted under the act since it was first introduced.

The purpose of introducing this bill is to expand the act to cover all businesses trading in the public sector and enable the automatic payment of interest on overdue accounts where certain criteria are met. The untimely payment of invoices where it occurs is as much a cultural issue as it is a systems issue. Therefore, enacting this bill will send a strong message to public authorities that the prompt payment of invoices is an important objective of the government. Establishing a financial penalty which is automatically paid to business will clearly reinforce this message and act to change behaviours over time. The key changes to the existing act as set out in the amendment bill are:

expanding the scope to cover all businesses trading with the government rather than the current limitation to small business;

reducing the minimum interest payment threshold from $20 to $10;

limiting application of the act to invoices with a value of $1 million or less; and

automating the payment of interest to business such that it occurs at the same time the overdue invoice is paid in accordance with the government's standard 30-day payment terms.

This is going further than the promise made by the government as part of its election commitment which targeted automatic payment for bills that were 60 days overdue.

The act will cover all public authorities as defined under the Public Audit and Finance Act 1987, brought under this definition through notice published in the Government Gazette. The Small Business Commissioner will continue to retain a dispute resolution function under the act. The public reporting of bill payment performance is not a feature of this bill; those requirements have already been addressed through the issuing of instructions in Treasurer's Instruction 11.

I might just add that in the draft of the second reading explanation that I have just read there is no reference to a 48-hour payment provision which is included in the bill. It is a time provision which allows the department to pay within a 48-hour period after the due date of payment. I will further explain that either in the reply to the second reading or in the committee stage of the debate. With that, I seek leave to have the detailed explanation of clauses inserted into Hansard without my reading them.

Leave granted.

Explanation of Clauses

Part 1—Preliminary

1—Short title

This clause is formal.

2—Commencement

Operation of the measure will commence on a day to be fixed by proclamation.

3—Amendment provisions

This clause is formal.

Part 2—Amendment of Late Payment of Government Debts (Interest) Act 2013

4—Amendment of long title

This clause amends the long title of the Act to remove a reference to small business.

5—Amendment of section 3—Preliminary

This clause removes definitions that are no longer required as a consequence of other amendments made by the measure.

6—Amendment of section 5—Occurrence of default event

This clause amends section 5, which sets out the circumstances in which a default event occurs for the purposes of the Act. Under the section as amended, a default event will occur only if an invoice sent or claim made by a supplier to a public authority is for an amount that does not exceed $1 million (exclusive of GST).

7—Amendment of section 6—Interest payable if default event occurs

Section 6 is amended by this clause to expand the circumstances in which interest is payable by removing the requirement for a default event in relation to which interest is payable to relate to the supply of goods or services as part of a small business. Currently, a supplier is not entitled to interest if the amount of interest that would otherwise be payable is less than $20. An additional amendment changes this so that the relevant amount is $10 rather than $20.

A further amendment removes the requirement for a supplier entitled to interest to claim the interest by furnishing an invoice in the prescribed form. Instead, a public authority that is required to pay interest under the Act must pay the interest within 48 hours of the authority paying for the goods or services.

8—Amendment of section 7—Disputes

This clause amends section 7 as a consequence of other amendments that mean that the question of whether a supplier is carrying on a small business will no longer be a relevant consideration.

9—Repeal of section 10

Section 10 is redundant and is therefore to be repealed.

Schedule 1—Transitional provision

1—Transitional provision

Under the transitional provision, the Act as amended by the measure will apply only in relation to invoices and claims rendered after the amendments commence.

Debate adjourned on motion of Hon. I.K. Hunter.