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House of Assembly - Fifty-Fourth Parliament, First Session (54-1)
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Late Payment of Government Debts (Interest) (Automatic Payment of Interest) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 19 September 2018.)

The Hon. S.C. MULLIGHAN (Lee) (15:38): I indicate that I am the lead speaker for the opposition on the bill. This is a good initiative of the new government that makes a series of minor changes to improve the regime by which the state government is required to pay interest to businesses that have had an invoice sitting with government for a period of time that has not yet been paid and not been paid within the due date.

The regime to pay interest on overdue invoices was introduced by the former Labor government, but it was introduced in a manner in which the company or the organisation that had the outstanding invoice yet to be paid by government had to apply to the government for the additional interest to be paid as well as the invoice itself. I think we can all be honest—I am sure those opposite will be very honest—in saying that this certainly led to the situation where few people made applications for interest to be paid on top of their invoices and that may have been for a range of reasons.

For smaller invoices, or for invoices that had sat unpaid for only a relatively brief period beyond the due date, the amount of interest that the company or the organisation might have been entitled to was perhaps only very small and not worth the bother of putting in an application for the interest to be paid as well as the amount on the invoice, or it might be perhaps something a bit more concerning. Certainly, this is part of the rationale of the Treasurer in the other place who has introduced this bill; that is, an organisation or a company may not feel confident in making that application for interest to be paid because they are worried about any potential repercussions from an agency that would then be forced to pay that interest.

When I say 'repercussions', it may be that they were a supplier of goods or services to an agency that may not perhaps be looked upon quite so favourably by a government agency if that organisation or company had to oblige the government agency to pay interest. While I would like to think that that sort of behaviour by officers within agencies related to procurement would be non-existent, or at least few and far between, I can understand why, in an often very competitive environment between suppliers to state government, that fear would exist amongst some agencies.

How to eradicate that fear amongst companies and organisations is obviously a broader problem that needs to be tackled at some point by government. I do not mean the government opposite, but just in terms of government doing business every day with private sector suppliers. That fear should not exist, but if that was a reason why applications were not being made for interest payments then that is regrettable.

To the government's credit, they have sought to lower the threshold for the amount of interest that can be paid, and I think that is also a positive thing. They have expanded the scope to cover all businesses dealing with government, rather than just the limitation to small businesses, but they are limiting the application of the act to invoices with a value of $1 million or less, which I think, on the face of it, can be justified for some types of procurement.

Certainly, in the areas of government procurement that I was responsible for superintending via the Department of Planning, Transport and Infrastructure, where there is quite a lot of either infrastructure works or building works, it is not unusual for built work to have to be inspected or certified before an invoice can rightly or justifiably be paid by a government agency. Sometimes that can lead to invoices—certainly for amounts in the many thousands, hundreds of thousands or even millions of dollars—not being paid within, say, 30 days or the due date because that inspection, compliance or certification activity has not occurred.

Quite often, there will be rectification works, which are required by a contractor who is performing work on behalf of the state government, particularly in the area of commercial construction or civil construction, to ensure that what the government has contracted for is indeed being delivered by the agency. In that regard, it is understandable that the government would seek to limit this regime to invoices for less than $1 million.

However, of course, the flipside of that coin is that sometimes there will be occasions when goods or services have been provided, an invoice has been issued for an amount exceeding $1 million, which could easily be processed without that certification activity, which I alluded to earlier, and it goes unpaid. That is, I think, a part of the bill and part of the regime that the government and, if not, the parliament will need to pay some attention to going forward.

Certainly, if it is the experience of the Small Business Commissioner that there are invoices for goods or services provided to government in excess of $1 million, which should be able to access this regime and which are unable to access the regime, then that is something that will need to be reviewed in the future. One welcome part of this, as I mentioned earlier, is changing the earlier regime of interest being paid upon application to automatic payment, and that is positive.

Obviously there will be some issues that need to be attended to by procuring agencies to make sure that their systems and processes are able to enable that to occur. The regime—and I am sure I will not describe it completely accurately—where invoices received by government agencies are then transferred off to Shared Services South Australia for a payment, needs to ensure that that interaction between the agency procuring the goods or services and Shared Services can enable that to occur seamlessly and to occur within a short enough time period.

Unfortunately, from time to time there have been instances when payments have not been made to suppliers because reviewing invoices that have been submitted to government has not occurred in a timely manner. That is regrettable and it is a practice that unfortunately still continues to this day. This was not a practice that was confined to the former government: this is a practice that has continued into the life of this government.

While both the former government and the new government indicate in their accounts payable performance metrics that they are paying invoices by the due date in the proportion of the high 90 per cent range, clearly by definition that indicates that there are still 1 or 2 or 3 or more per cent of invoices that are not being paid by the due date in that time. Now, 1 or 2 or 3 per cent, and so on, does not seem to be a huge amount when expressed in that measure, but when you consider that the government spends several billion dollars a year on the procurement of goods and services, then you can easily see the quantum of money that those small percentages relate to.

Again, making the allowance for, perhaps, civil works or commercial construction works that may need to be certified, even making allowance for that, there are still many millions of dollars that are not being paid on time. The Auditor-General's reports for as long as I can remember, close to two decades now, have continued to lament that the accounts payable performance of government agencies is not as good as it could be.

Perhaps this government measure of introducing the automation of payment of interest can hasten the respective officers' attention to those invoices to certify that they are expected and correct and can be paid by Shared Services South Australia. Of course, some checks and balances are needed within this regime, and it is welcome that the government is also providing a specific role for the Small Business Commissioner in providing that level of oversight and that level of scrutiny of how this regime will receive complaints from the private sector about how the regime is operating, or indeed not operating, in their interests.

I think it is terrific that the Liberal government and the Liberal Party in South Australia have done an about-face on the role of the Small Business Commissioner. When the former minister for small business, the member for West Torrens, introduced the legislation into this place to establish the Small Business Commissioner and the Office of the Small Business Commissioner, that legislation was opposed by the Liberal Party. It is good to see now that they have had a change of heart.

Although he does not get a specific mention in the bill, it is also good to see that the Liberal government has had a change of heart about the role of the Industry Advocate, whose office and position were established by the former Labor government to make sure that South Australian businesses and suppliers had the best possible opportunity to win work for themselves from the state government. Indeed, his work starts at the very beginning of an agency's intention to procure goods or services from the private sector, educating agencies as to how they can make sure that their tender processes, tender forms, paperwork and their requirements can best position South Australian small businesses to win work from the state government.

That work then continues on to assist those small businesses in vying for that work, becoming competitive from that work and making sure that the procurement requirements for the state government deliberately favour South Australian companies and, at different thresholds of procurement, different dollar values of procurement provide percentage weighting to tender evaluations to favour South Australian suppliers. That is really positive. Fortunately, the Industry Advocate, Mr Ian Nightingale, has these figures at his fingertips and, over the last five years, it has led to a substantial increase in the amount of work won by South Australian businesses.

It was lamentable that the Premier (member for Dunstan) threatened to abolish the position of the Industry Advocate in the lead-up to the 2014 election because he thought that he was not doing his job well enough. I think that dozens if not hundreds of South Australian businesses can attest to just how well Mr Nightingale is doing his job now. I am glad that the Liberal government has chosen to not only continue his employment but continue his key role in helping small business win South Australian work and put them in the position where they can be issuing invoices to the state government for goods or services rendered.

The Small Business Commissioner and the Industry Advocate are one of a number of measures the former Labor government implemented to benefit directly the small business community in South Australia. That includes a succession of payroll tax reforms over the course of more than 10 years, which now sees, every year, more than $300 million less payroll tax being paid by South Australian businesses, which is terrific. That is $300 million more that businesses have particularly to invest in their own businesses or to invest in more staff, both of which generate better economic outcomes and opportunities for South Australians.

Members on both sides would be aware that I praised the new Liberal government for committing to increase the tax-free threshold for payroll tax permanently to $1.5 million. We think that is a good move. In fact, we thought it was such a good move that we called on them to do it a little bit earlier; we called on them to do it from 1 July this year. That meant there would have been an additional six months, or more than $20 million worth, of payroll tax relief flowing, particularly to South Australian small businesses, which would help them even more than the measures included in this bill. Of course that was rejected, but we divided on it, so we now have a permanent record of all those members of the Liberal Party who voted against earlier payroll tax reform for the South Australian business community.

I note, although it perhaps might be borderline unparliamentary to talk about it, that that bill still has not passed the other place. None of us down here would be surprised by that, such is the glacial progress that can occur in the other place from time to time. In fact, I am led to believe that the whiff of burning dust could be smelled yesterday as the light bulbs were turned on for a late afternoon sitting in that other place—a rare occasion. However, that is a digression and I will move swiftly on.

It was not just payroll tax that I am pleased to report the former Labor government reformed significantly, but also land tax. Those with long memories—and I am looking at the member for Morialta—would recall that in the 1990s the land tax tax-free threshold was actually lowered by the now Treasurer, also the then treasurer, Mr Rob Lucas of the other place. It was lowered from $90,000 down to $50,000, capturing many thousands more landholdings for the purposes of issuing land tax bills for many years.

Of course, that was until the 2005 reforms of the former Labor government, which significantly increased the threshold, the first significant increase of the land tax tax-free threshold. That continued to increase, so that by March this year that $50,000 tax-free threshold had become a $363,000 tax-free threshold. Literally tens of thousands of South Australians properties are no longer liable for land tax.

Not only that, most of the rates and thresholds were reformed considerably, with lower rates in the dollar applying to different land valuations between that increased tax-free threshold and the highest tax-free threshold, which at the time was $1 million and is now nearly $1.2 million. That targeted land tax relief to those people who needed it most, and when I say 'those people' I mean South Australians, people who have invested in real estate. It is good to be joined by the Minister for Environment when we are talking about investing in real estate because he, amongst many others in this place, is one of those.

Thousands of South Australians have benefited from these land tax reforms. It has been a very Australian thing, and a very South Australian thing, where people have the capacity to buy a home and then pay it off as quickly as possible until there is perhaps the capacity to invest in another home, perhaps using that as a rental property or a holiday house or shack in one of the very many places in South Australia where it is attractive to spend time. Those land tax reforms implemented by the former Labor government have saved tens of thousands of landowners many thousands of dollars in land tax liabilities.

I will not talk too much more about land tax except to say, specifically about small business, that not only those who own land enjoy the benefit of those land tax cuts; people who are operating their small business from their principal place of residence also benefit from those land tax changes. For the first time, people could nominate to RevenueSA which proportion of their principal place of residence they were ostensibly using for the purpose of running a small business and, rather than being slugged land tax for the whole of the value of their principal place of residence, they were only being charged land tax for that proportion of their principal place of residence.

This massively reduced land tax liabilities for small businesses, particularly during the 2000s when land values were escalating sometimes by the double digits each year, and saved them significantly in tax bills to the state government. Of course, we have heard before I think somewhat magnanimously from the Treasurer in the other place, the Hon. Mr Lucas—and you will excuse me if I say we are not used to such 'magnanimousness'. I know that is not the word but I do not trust myself to pronounce the correct word.

Mr Odenwalder: Magnanimity.

The Hon. S.C. MULLIGHAN: There we go. But he did recognise very early on in this term of this government that the WorkCover scheme was performing very well on an actuarial basis, that levy rates continued to be low and that there was no unfunded liability in the scheme. Those WorkCover reforms, on top of the $300 million of payroll tax relief, on top of the $200 million of land tax relief, are providing approximately a further $200 million of tax relief to the small business community.

We are already at $700 million a year of tax relief that has been provided to the business community here in South Australia, and I have not even gone into the $250 million a year cut to stamp duty on commercial property transactions or the other smaller intergovernmental agreement taxes which were agreed to be abolished when the new GST was brought in from 2000 onwards. They were things like share duty, lease duty, rental duty, cheque duty, the bank account debits tax, the financial institutions duty, and I think—my memory is getting hazy now—the former Liberal government also reduced, I will not get the name right, the accommodation duty or the bed tax, which was applied up until the mid-1990s as well.

So this is many hundreds of millions of dollars of tax relief, as well as the introduction of a small business commissioner, as well as the introduction of the industry participation advocate, as well as the procurement policy reform, all of which are very positive for the small business community in South Australia. I note that I have received a fairly thorough briefing from the office of the Treasurer and from Treasury as this bill was introduced in the other place and, unless new matters come to light in the contribution of other members, I foreshadow a very swift if not instantaneous duration in the committee stage of this bill.

Mr TEAGUE (Heysen) (16:03): I rise to commend the bill to the house. I have listened carefully to the member for Lee and welcome his acknowledgement that this is indeed a good initiative. It will not surprise the member for Lee that I intend to speak somewhat plainly about just how good an initiative this is and how practical and outcome-oriented it is.

May I take the opportunity to observe once again that this is business as usual for this new Marshall government. We are committed at an early stage to implement measures that are directed towards practical outcomes in the interests of South Australians, in the interests of people in business in South Australia and, particularly for the purposes of this bill, those in business with government. We on this side of the house are well aware that cash flow and efficient business engagement are golden, particularly for those in small business, but those in all kinds of enterprise which rely on the efficient payment of their bills. They should have that expectation no less so—indeed, all the more so—when dealing with government.

In the time I have available to speak about the bill, it is important that I trace the history of how we have come to this point as a new government. This initiative by the new government is one that was amply available to have been taken by the previous government at any stage over the previous four or more years since the 2013 act was introduced. The Late Payment of Government Debts (Interest) Act 2013, as it is somewhat virtuously named, was introduced by the previous government, I presume with the intent to send a message to those dealing with the government that the government was interested in making sure that they would be compensated for late payment by government, that the government was aware of their concerns and all the rest of it.

As the member for Lee has acknowledged, the regime that was put in place in 2013 by the previous government when enacting the virtuous sounding late payment act primarily involved a two-step criterion in order to access the so-called entitlement to receive interest on late payments. The first was that the relevant business had to go about establishing its credentials and bona fides as a small business, as defined in the act. Secondly, as has been addressed, as the act was first brought in, it then had to go about making its application for the interest that it was entitled to, according to the provisions of the act.

So, first, it had to establish that it was a small business, as defined, and, secondly, it had to go through the rigours of making an application, which involved sending a further invoice. As the member for Lee perhaps quite rightly observes, there might be all sorts of reasons—quite apart from the time that it takes, the resources and all the rest of it to go to the effort of sending a further invoice—that a business might be somewhat reluctant to do that and perhaps bring itself to the attention of the government agency that it was dealing with.

Nonetheless, the small business has to do those two things. That involves, on the one hand, the small business going to a whole lot of unnecessary trouble and, on the other hand, the government going to a whole lot of administrative burden to satisfy itself that the business was indeed a small business, as defined, and, secondly, that the application was appropriately prepared. Unsurprisingly, that resulted in almost nobody seeking to have the interest that they were entitled to paid to them because it was all a bit too difficult and potentially brought opprobrium on the poor small business involved that was entitled to the payment.

It gets better and more Orwellian that, though, because section 10 of the act, as it was enacted, required that the Treasurer report to parliament about how the act was progressing, and to do so within 18 months of it being enacted. Part of the reason that the Treasurer was required to report to parliament was that the bill as enacted actually contemplated a transition to the automation of these payments. The member for Lee will be well aware of that and no doubt very much welcomed the contemplated transition to automation under the previous act.

The act started out with a section 6(6)(a), which provided that the small business needed to apply for its interest and, if it jumped over all the necessary hurdles, then it might receive its interest payment. It further provided, in this section 6(b), that that was to be really a transitionary arrangement until the Treasurer set a designated date, after which those interest payments would become automated.

So everybody waited, throughout the course of 2014 and through the first half of 2015, until the Treasurer duly reported to parliament. I commend the report of the previous treasurer, the member for West Torrens, for its Orwellian reading. I commend it to all honourable members. It is dated August 2015 and it is called 'Report for parliament—Late Payment of Government Debts (Interest) Act 2013—automated interest payment'.

It is only a short report. It is a report that sets out that it has been prepared in accordance with section 10 of the act, being a requirement to advise parliament of the arrangements that would need to be established in order to automate the payment of interest to small business vendors on overdue accounts. The report claims to have made four significant findings, and they may be stated briefly. They are, firstly, that since the act took effect—that is, early 2014—there have been no identified claims for late payment interest submitted by small business vendors, so no surprises there against the background that I have outlined. There had been no identified claims.

Secondly, the report claimed that the percentage of invoices paid on time had, in fact, significantly improved. So far, so virtuous in terms of claims. It perhaps merits a pause at this point to note that things clearly went downhill dramatically after this report was provided because we learned that in 2016-17, 110,000 bills were late paid in total, amounting to $603 million. If there had been some evidence of improvement about payment, clearly that was a situation that deteriorated in the period after the report was written.

Thirdly, and importantly, the report highlights or identifies a problem that there would be an ongoing cost to government of administering late payment interest automation, which would be comparatively high because the act required suppliers, even in an automated environment, to evidence that they were a small business and the evidence needed to be validated before they would receive any late payment interest. The report indicates, therefore, that there was some virtue in relieving small business of the need to make application, but poor old government was still going to be left with having to verify the status of the vendor as a small business before it could provide for the automated payment.

The former government did not seem to twig that had it removed that second part of the problem, and moved into an environment where there was no need for a satisfaction of some definitional test but rather a businesslike, practical and outcomes-oriented process that might be implemented instead, then that problem could have been overcome and a transition to automation could have happened pronto. But, no, it was described as a virtue that this ongoing administration impost was remaining as a reason not to transition to automation.

Fourthly, the third and fourth significant findings of the report can really be wrapped up as one, in my observation. Because of that administrative burden, there was going to be little change to the administrative burden to small business vendors because they would have to keep on establishing those bona fides every time. The punchline of this six-page report, duly prepared in accordance with section 10 of the act, was that it was proposed that the Treasurer, in fact, not go ahead and designate a date at all for the automation of the payment of interest to take effect as contemplated under section 6(6)(b). That is the recommendation of the report at paragraph 4, page 6 at about point 5 on the page.

I again commend the report to all honourable members as an example of an extraordinarily Orwellian endeavour by the previous treasurer to characterise as a virtue the failure to come to grips with what was readily available as a means to deliver a business-oriented practical outcome to business. It was not taken. Great excuse was drawn upon for no change. What we are left with is a virtuous sounding act with very little efficacy in business practice whatsoever.

Before the member for Lee digressed into discursive analysis of topics other than the legislation before the house, he made a further observation that, while it was practical that we had done away with the small business definition and implemented instead a cap of $1 million on a transaction, perhaps that might need reviewing because it may or may not be an appropriate notional threshold to leave in place. While there might be something to be said for that, what is really at the practical core of that change is that we have moved away from business having to jump through hoops to fulfil the definition of small business; instead, we have said, 'Just look at the size of the invoice; that will give you a fair idea of the sort of business we are dealing with.'

It is well to remind ourselves that the definition of small business, as it was under the act, was confined to business that had a turnover not exceeding $5 million. If we are talking about a comparison from a defined situation, small business being a business with a turnover not more than $5 million, and we are moving to a situation in which the invoice should not be more than $1 million, one can see fairly readily that we are not going to be cutting out too many vendors, if any, who deal with government as a result of that practical change; rather—to the extent that we practically can—we are simply setting a point from which an automated payment may be made.

The bill, by transferring away from the section 6(6)(a) and (b) structure that stayed around unimplemented and unacted upon over the course of the last parliament, is done away with altogether and what is there in its place is a new section 6(6) that simply requires that the public authority make payment of the interest within 48 hours of making payment on the invoice proper.

In the short time still available to me, I want to highlight the extent of the Orwellian nature of the previous regime. It might be well illustrated by the Frequently Asked Questions page on the Shared Services SA website. This ought be no reflection whatsoever on the good people who discharge services for our state at Shared Services, but they are clearly operating in an environment where they had to deal with a government that was not able to act on the implementation of practical business-focused outcomes.

The Frequently Asked Questions page includes an attempt to provide a helpful answer to the question: what is the definition of a small business? It tells us that the business is one that did not exceed $5 million in annual turnover in the relevant financial year, as I have previously referred to, but it goes on, and I encourage honourable members to read this before it is moved on fairly rapidly after the enacting of the bill.

How can an organisation prove it is a small business and therefore eligible to claim late payment interest? We see a four-step analysis: vendors must provide Shared Services SA, or the applicable authority, with a copy of the Business Activity Statement, a copy of the further income tax return and, where the small business was not operational in the previous financial year, a copy of the business' BAS for the previous two quarters. Where the small business was not operational for the previous financial year and not registered for GST, this requires a copy of the business' income and expenditure statement.

One can see fairly readily why nobody was going to the trouble of jumping through the bureaucratic hoops in order to claim what may or may not have been a relatively substantial entitlement to interest as a result of the slow payment. All that is swept away by this practical business-oriented and outcome-oriented reform.

It may be that there is limited time now for honourable members to take advantage of looking online at those frequently asked questions because, once this bill is enacted, there will be no need to address the frequently asked questions on this page because businesses in South Australia dealing with government will rightly develop an expectation that government will pay them on time. They will rightly experience both the entitlement and the actuality of the receipt of interest rightly payable on bills not paid on time.

As is business as usual under the new Marshall government, they will become increasingly confident in the knowledge that they have a government that is acting towards delivering outcomes that ensure that business can both engage with government and thrive in the process of an environment in which one can conduct one's business with government with confidence. I commend the bill to the house.

Mr PATTERSON (Morphett) (16:23): I rise to support the Late Payment for Government Debts (Interest) (Automatic Payment of Interest) Amendment Bill 2018, which broadens the application of the existing Late Payment of Government Debts (Interest) Act from 2013.

Specifically, these amendments expand the scope to cover all businesses trading with the government, rather than the current limitation to small business; reduce the minimum interest payment threshold from $20 to $10; limit the application of the act to invoices with a value of $1 million or less; and automate the payment of interest to business such that it occurs within 48 hours of the time of the overdue invoice being paid, which will be in accordance with the government's standard 30-day payment terms.

The late payment of invoices can cause cash flow issues for business and negatively impact their ability to meet their financial commitments. Within the electorate of Morphett, there are thousands of businesses that this government is committed to supporting. These thousands of businesses provide people of this state with employment, experience and a living wage.

The greater Glenelg area has close to 2,300 businesses as of 2017, with industries ranging from construction, tourism, accommodation, retail, trade, financial services, education and training, and include the highly valued Jetty Road, Glenelg. Glengowrie, Morphettville and Plympton Park have a little over 710 businesses as of 2017 in industries such as construction, transport and warehousing, financial insurance services and professional, scientific and technical services.

Not all these businesses will have direct commercial interactions with the state government; however, most sectors of our modern economy are highly interdependent. Individual businesses employ labour and capital and use resources and purchase from other businesses, and a lot of these small businesses may be a supplier or a contractor to a business that does provide services and goods to the state government. So not only does the consumption of these goods and services by the state government provide direct jobs but through the multiplier effect they provide indirect jobs, and so the late payment invoices can cause cash flow issues for these businesses and negatively impact on their ability to meet their own financial commitments.

I know from running my own business that there are no guarantees for the business owner to be paid a reliable salary. The pressure is always on to satisfy existing customers and to find new ones, and a critical component of this is having the business's invoices paid on time. This helps greatly with the cash flow, which then means importantly that a business's employees can be paid and the bills for that business paid to allow the business to run smoothly and also, finally, to allow the business owners themselves to be paid on time. While invoice payment performance is generally at an acceptable level by the state government, there is still substantial opportunity for improvement.

It was revealed in December 2017 that the previous government paid over 110,000 of its bills late during the 2016-17 financial year, totalling over $603 million. The existing act requires the state government to pay its outstanding invoices within 30 days, and if this does not occur a business is able to apply for a late payment fee. The untimely payment of invoices where it does occur is as much a cultural issue as it is a systems issue. A regular wage may insulate public authorities from truly understanding the importance of the timely payment of invoices. Therefore, enacting this bill will send a strong message to public authorities that the prompt payment of invoices is an important objective of this government.

Establishing a financial penalty, which is automatically paid to business, will clearly reinforce this message and act to change behaviours over time. The Department of Treasury and Finance has advised that, based on the current level of late payments, an estimate of the interest cost could be around $1.4 million per annum, and about 50 per cent of this relates to Health. Agencies will be required to fund any interest cost incurred out of their own budgets, and so obviously the incentive for agencies will be to reduce the need for any of these payments at all.

As the member for Heysen has outlined, the 2013 legislation required an unnecessarily costly and bureaucratic process in order to claim this late payment interest, and due to this process, as has been outlined, there have been very little interest claims submitted through this channel since its introduction five years ago. This is why, during this year's state election, the now government committed to make interest automatically payable to businesses for invoices that were paid 60 days late, and reduce the threshold from $20 to $10.

Since the election, this time frame has been reduced to 30 days. This was part of our government's promise to create and foster greater government and public sector accountability, ensuring that the people and businesses of this state are able to rely on their government. Importantly, this bill has been introduced to this house to expand the existing act to cover all businesses trading within the public sector, not just small businesses, because, as I mentioned previously, larger organisations invariably have small businesses as their suppliers, so this announcement will also have a multiplier effect for those small businesses.

As the member for Heysen said, the report to the parliament in 2015 that reviewed the automatic interest payments and considered the possibility heard that one of the reasons it could not be automated was that it would still require the government agency to verify the status of small businesses, whether that is by providing copies of their BAS or their past tax returns, therefore really making it nigh on impossible to have automation while you had this distinction between different businesses that had invoices outstanding. Applying it to all businesses certainly frees that up and allows for the possibility of automation.

This important amendment will not only enable but ensure the automatic payment of interest on those overdue accounts where certain criteria are met. Important changes to the existing act have been included in the amendment bill to emphasise to public authorities that this government requires and will ensure prompt payment of invoices. We are committed to ensuring that overdue invoices will be paid in accordance with the government's standard 30-day payment terms. Again, it is another example of an election promise delivered by this government for the greater good of the South Australian economy.

This government acknowledges how important small businesses, in fact all businesses, are to the state economy. That is why this bill has been introduced to support businesses by ensuring that they are able to rely on the government to pay their bills on time. If not, they will automatically receive late payment fees because we know that a state without a strong economy is a state that is at risk. So, this government is proud to support our state's business financial interests through this bill. The newly amended act will cover all public authorities as defined within the Public Finance and Audit Act 1987. It is very important to mention that the Small Business Commissioner will continue to retain a dispute resolution function under this act.

This is a very important bill for the greater good of South Australian businesses, their owners and operators, staff and customers. Operating a business can be a highly stressful yet lucrative career path; however, everyone who has ever run a small business understands it is frustrating and worrying when payment for services is received late or not at all because that late payment has a profound effect on the everyday expenses and running of a business. It can impact on wages, productivity, overall morale and cause additional stress on operators and owners.

Of course, these are not the only measures to assist not only businesses in Morphett but all those businesses around the state. From 1 January 2019, South Australia will see the introduction of the removal of payroll tax for all small businesses with annual taxable payrolls below $1.5 million, meaning that approximately 3,200 businesses will become exempt from payroll tax, each with a possible saving of up to $44,550 per year. At the same time, all South Australians will benefit from the reduction in their emergency services levy, being $360 million over the next four years.

With the first of those bills having recently arrived in the letterboxes of South Australians, and the savings that they are experiencing now, this is money that they can elect to spend how they see fit, which will provide a $90 million boost to the South Australian economy this financial year and benefit many businesses throughout Morphett. If I use Jetty Road as an example, that is one strip that relies on discretionary spending from people visiting the area from outside the district or from local residents who sustain the strip through the winter months by buying local.

Just recently, I had the pleasure to take the federal Minister for Small and Family Business, Michaelia Cash, and the federal member for Boothby, Nicolle Flint, on a tour of Jetty Road. We started at the Brighton Road end at the Bayside Shopping Village and then made our way along Jetty Road, stopping at the Bay Junction Florist, past the renowned Haigh's Chocolates shop and on to Enve Hair, which is owned and run by the chair of the Jetty Road Mainstreet Committee, Mark Faulkner.

We then followed on to Caruso's Fresh Foods, before finishing at the other end of Jetty Road in the beautiful Moseley Square where we met the business owners of Cibo Espresso Glenelg—which interestingly has just won the award for best coffee along Jetty Road at the recent Mainstreet SA Awards—finally finishing at the award-winning Moseley Bar and Kitchen. Those owners identified the costs of doing business as impacting upon their businesses.

The measures that I have just outlined that the Marshall government is undertaking have been welcomed by these business owners, and they spoke of the renewed confidence they are experiencing, but they are also seeing that confidence translate into their customers as well.

The reforms I have spoken about are about helping grow the economy, about creating a level playing field for all businesses, and they do not rely on politicians picking winners in business. This bill is important, and the changes to the existing act will be welcomed. The government needs to pay its bills on time. If this does not occur businesses should not be forced to dedicate their valuable time and effort chasing up a very financial state government. That time could be better spent by those business owners in growing their own business.

The government has a responsibility to the people of this state to remain accountable and to set an example for other businesses to follow. This government intends to hold itself accountable to the people of this state, and will not impose a late fee upon customers if we cannot hold our departments to the same standard. I commend this bill and look forward to its introduction.

Mr McBRIDE (MacKillop) (16:35): I rise today to speak in support of the Late Payment for Government Debts (Interest) (Automatic Payment of Interest) Amendment Bill 2018. In my view, this bill includes appropriate steps to ensure that businesses are not disadvantaged by the late payment of bills by South Australian public authorities. It is yet another example of the Marshall Liberal government following through on its election commitments.

The government is committed to making interest automatically payable to businesses for any undisputed invoice paid 60 days late where certain criteria are met. This includes a $10 minimum invoice threshold compared with the $20 threshold described in the current legislation. In this case, we have taken our promise a step further to ensure that automating the payment of interest to businesses occurs at the same time the overdue invoice is paid, in accordance with the government's standard 30-day payment terms. It is a move that will ensure greater accountability for payments.

This bill appropriately widens the definition of which businesses by removing the reference to small business, ensuring that all businesses transacting business with public authorities are eligible for interest payments. Bills unpaid can mount up for businesses large and small, which results in additional costs to businesses that may come in the form of higher interest payments and larger borrowings that they may need to make to ensure they have adequate funds to operate.

It is an unacceptable situation where public agencies do not make their payment commitments on time, particularly when it results in additional costs to the very businesses that we not only want to be operating but that we also want to be thriving. The bill proposes to reduce the amount of paperwork required for businesses to claim these interest payments should invoices not be paid on time.

The bill is a step in the right direction. Our government is taking steps to ensure that the environment for doing business in South Australia is conducive to helping businesses thrive. The bill takes steps to reduce the cumbersome paperwork embedded in the current Late Payment of Government Debts (Interest) Act 2013. Under that act automatic payment was not made, and businesses needed to make application for interest payments if payment was late. This has resulted in almost no claims for interest by South Australian businesses. The changes should provide for a less bureaucratic process, enabling businesses to get on with their own core business.

The public sector has been criticised for this slow payment. Enacting this bill sends a message to public authorities to ensure they have their house in order and understand the priorities of government to ensure prompt payment. The changes proposed by the bill are not accompanied by additional funding. This automated approach to interest payments for unpaid invoices is a cost that will need to be met by public authorities. More than ever, it will be in the best interests of authorities to ensure that payment is made on time.

To understand what this means and why this new Marshall Liberal government is going down this line, it is consistent right across the board with a lot of great new policies that I see in place. We want to make sure, with this bill, that we are creating an environment for small and large businesses to be able to act in an effective and efficient manner, in particular relating to any government payments.

We know, and many members on this side of the chamber who have been in small business know, there are vagaries in small business where we have to miss a few hurdles. We have cyclical downturns, we have upturns, but there is never a period that is always the same. We know that sometimes when we are dealing business to business there is not always a guarantee that you will get your money, or even on time, and to have a government that wants to play that sort of game as well is another vagary that businesses have to miss and get over or go through loops and over hurdles to be a profitable strong business in South Australia.

I think the fact that it needed our government to come to power after 16 years to bring amendments and changes which advocate for small business and large business, which advocate a process that is seen as effective and efficient for businesses to thrive in, is obviously a very welcome change out there in the state today. Have they not waited long enough for it?

We also recognise that when businesses are not paid in a timely fashion, whether it be by government or other businesses that they are trading with, it indicates that they think that businesses are some sort of financial institution. You might think that they do not need their money in 30 days, so you can take 60 days or even longer. All that does is put pressure on the business, it puts stress on the stakeholders, it puts pressure on the employees and staff and it puts all that those businesses belong to under more difficulties than they need to be.

I think this is one of those small but very positive steps with a raft of other issues that this government has brought to the fore to make businesses stronger in South Australia. This is why I am very proud to be part of this new Marshall government in the sense that I think South Australia will go on and be a powerhouse of a state later on with the changes that we have implemented.

I want to add to those further points. The Marshall government has brought this small business interest bill here to make sure that bills are paid on time. We look at the emergency services levy, as the member for Morphett just realised, and I also think the member for Heysen touched on it, but $90 million a year—$360 million—is going to be left back out in the hands of businesses, private owners, private dwellings and individuals in South Australia. It is not going into government coffers and it is being left out in the community for the community to grow.

One of the most important things about that whole aspect is that, yes, it is $90 million a year but the people of South Australia get to choose how that money is spent, how it is used to develop this state, whether it is for the education of children, the training of staff, infrastructure and investment in more profitability, or even luxury items or luxury in our daily lives by going out and having dinner in a cafeteria or a restaurant or any other small business. These are the opportunities this government is creating by the emergency services levy, along with a raft of other tax-saving advantages the Marshall government is putting out there.

As to the natural resources levy, we are looking to reshape that to get the cost down on that levy faster than ever. I know when the natural resources levy first came out it was only $30 or $40 per household and now it is up over $300 per household in the time that the last government was in power. What is not recognised in that, and although you could say, yes, but we are gathering this money because we have important projects, you take away the ability of businesses and individuals to make their own choices. The government thinks it knows best. The government thinks it has grand or great ideas.

I will refer to a point that was made by the late Kerry Packer. People are not leaving more money to a government in their will or bequest when they pass on, thinking that it is a great way to use up their funds as though government is a great answer to spend money around the place. No-one is doing this and there is a reason for that. The government has priority spending but on our side of this chamber in our world, we think it should be a minimal spend, not a maximum spend like those on the other side of this chamber.

The other thing that is really fascinating about small business and this little advantage we have here, and it is not totally recognised on the other side of the chamber, is what they did to power prices. It all adds up. The power prices have gone up nearly 200 to 300 per cent over the last 15 years. Yes, we know we have inflationary increases generally, but not in that realm at all. I know this government is working hard to reduce the power prices. In my books, it is not fast enough, but we have to be patient, we have to get it right and we have to unravel what the other side did to power prices over 16 years.

What is not recognised on the other side of the other chamber—when we went through estimates and we heard their claim about how bad our budget was, we heard about how we are hitting the Housing Trust rent issue—is that the rent issue is a small impost compared with the impost that the other side of this chamber imposed on the economy of South Australia and those who are most vulnerable by just the power prices alone, which they do not recognise.

As this government makes these small incremental changes, as we make it better and better for businesses to prosper and thrive, these small aspects will turn South Australia's fortunes around, we will become a strong economy and then I hope we can start to address our debt level, start to live within our means and be a powerhouse of a state that can live within our means, unlike what the other side did over the last 16 years.

The old system that was in place for this debt, which we are changing, would have created cash flow for small businesses. With government contracts, both small or large, if a business is going to put in a quote or do a job for the government, but they are worried about payment, they actually have to make the cost higher because they do not know when they will be paid, because there is an impost in not paying on time.

We already know—well, I have a feeling I know—that when the government put out contracts they are not the same private contracts and costings as they would be if they were private contracts out in the private world. We have more bureaucracy, we have more red tape, we have more hurdles imposed in these contracts, so it costs more to do anything that the government does. If you add on top of that the fact that you may be paid late as well, it adds to the rise in the cost of doing business in South Australia and the government to fulfil its job and do the contracts that it is trying to do.

Why was this bill needed and required and why was it not imposed by the last government? Why did they sit there and just watch it and happily see that no interest was paid because of all the paperwork that was required to get your interest? Why were payments not made on time, as they are anywhere else? It is actually part of the complacency of what the Labor Party used to be when they were in government. They became complacent. They took it for granted.

They did not actually understand, I do not think. I do not know if they really wanted to hurt the state at all; I think they actually meant well. I heard some speeches from the other side, such as from the former treasurer, where he admitted to making some mistakes. I get that it is a pretty tough ask to be perfect over the full 16 years, but it is actually not just one-offs; it is a total attitude.

I will describe the last 16 years of the Labor government in two forms: there were your first eight years where you had desire and passion to lead and do your own Labor antics and goals that you probably aspired to as the Labor Party, and then in the next eight years it was, 'What are we going to do next? Where are we going now? What is the consequence of what we are up to?' It actually shows you may not have even really cared.

You were happy to be in government, you were happy to be leaders and you were probably happy to put the Labor way across our state, but I do not think you really took a sharp, hard look at the results of what you were up to and what you were doing.

The Hon. S.C. Mullighan: He is actually the Deputy Speaker from your party.

Mr McBRIDE: I will take that on board. This is why I think it is very important that we pass the measures this government is trying to put in place to try to make it easier for businesses to do business in this state, and for the government to lead by example in a business-savvy state that we want to build, to have a strong economy. This bill is part of that process. This bill is going to make it easier and more transparent for businesses to operate.

The bill will bring about a professionalism to the Public Service sector, which will create accountability and transparency through the public reporting system. I can only say that that is great for the state. It may be only small in the context of the whole processes of government and government jobs and contracts, but all these small steps that we are taking are moving the state in the right direction. I commend the bill to the house.

Mr PEDERICK (Hammond) (16:49): I am not sure how I am going to match the blistering performance of the member for MacKillop today, but I will make an attempt in speaking to the Late Payment for Government Debts (Interest) (Automatic Payment of Interest) Amendment Bill 2018. Part of the detail around this legislation is to expand the scope to cover all businesses trading with the government, rather than the current limitations to small business; reduce the minimum interest payment threshold from $20 to $10, and limit the application of the act to invoices with a value of $1 million or less; and automate the payment of interest to business such that it occurs at the same time that overdue invoices are paid in accordance with the government's standard 30-day payment terms.

This is going further than the initial promise made by the government as part of its election commitment, which targeted automatic payment for bills that were 60 days overdue. If the bill becomes law, the act will cover all public authorities, as defined under the Public Finance and Audit Act 1987, brought under this definition through a notice published in the GovernmentGazette. 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 the bill. These requirements have already been addressed through the issuing of instructions in Treasurer's Instruction 11. The first report for the month of May 2018 has now been published. Some scope around the background of this is that businesses complain about the late payment of bills by South Australian departments. While invoice payment performance is generally at an acceptable level, there is still a major opportunity for improvements. The late payment of invoices can cause cash flow issues for business and negatively impact on their ability to meet financial commitments.

As part of the 2018 state election, at the time the Marshall Liberal opposition, which obviously turned into government—which was a great boon for business right across South Australia—committed to making interest automatically payable to businesses for any undisputed invoice paid 60 days late where certain criteria are met, including a $10 threshold, and creating 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. It is like the bureaucracy making more bureaucracy.

The purpose of introducing the bill is to expand the act to cover all businesses trading with the public sector and enable the automatic payment of interest on overdue accounts when 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 the bill will send a strong message to public authorities that the prompt payment of invoices is an important objective of this government. Establishing a financial penalty, which is automatically paid to business, will clearly reinforce this message and act to change behaviours over time.

The Department of Treasury and Finance have given advice that, based on the current level of late payments, an estimate of the interest costs could be around $1.4 million per annum, about 50 per cent of which relates to Health. Health, by the way, takes 30 per cent of our public funding anyway. It is at around $6 billion out of a $19 billion budget. Agencies are required to fund any interest costs incurred. Obviously, the incentive for agencies is to reduce the need for any payments at all.

Consultation around the draft legislation has been undertaken with the Small Business Commissioner, the Industry Advocate and Business South Australia. Feedback has been overwhelmingly positive and all public sector authorities have been advised of the changes, and agencies are working with the Department of Treasury and Finance on an implementation program.

It is interesting to note that it has become a cultural issue and not just a systems issue that somewhere in the system some people think it is okay to string along small, medium and large businesses. That is not what helps the economy to function, considering that businesses are the lifeblood of an economy and need cash flow to survive. Quite frankly, as long as businesses are putting their accounts in and getting them in on time, they should be paid on time so that they can keep performing work. They have bills to pay, staff to pay, capital items for pay for and all the other overheads. Business at any level, whether small, medium or large, has so much to pay for; it is just a sliding scale.

A few years ago, when the Labor Party was in power, the former member for Napier and I were discussing the issue of accounts of members of parliament not being paid on time. Members of parliament were having their phones cut off. You wonder whether that was symptomatic of bureaucracy. We actually got on alright from across the political divide, and I always get some interesting looks when I talk about the former member for Napier. He came up with a novel idea: he said, 'Adrian, you just pay the bill and we will pay you back.' I said, 'I am not going to pay for the government's debt.' That was not going to happen. To his credit, the former member for Napier put a credit card-style system into our offices so that we could pay small accounts and they would be clarified later.

Seriously, it is about keeping the small things functioning. A member of parliament has two staff and a trainee; there is a lot going on and you have to make your work function, make your office function and make basic things, like paying your accounts, happen. Who knows what sort of chaos there was in the private sector when we, in the public sector, could not get the system to work in relation to the payment of accounts?

Somewhere in the system there is a cultural issue as well as a systems issue. It happens in the private sector as well. I have an account at the moment with a certain company. Yes, we have paid the bill, we have sorted that, but they cannot seem to switch me back to something I need to help me function as a parliamentarian and keep me informed. You wonder why it gets so hard. In these days of technology, things should be streamlined, but it seems that the better the technology, the worse off we are, especially when we have full-system failures, as we had recently.

The issue is about making sure that people get their funds in full and on time. Obviously, it will penalise departments: if they do not pay on time, they will have to meet it out of their budget. As we saw, the average could be something like $1.4 million. It does not sound a lot, but that is the interest part of these payments. That means significant money is being held up somewhere in the system and not going to our small, medium and large businesses to make sure that they can function appropriately.

This legislation is timely and cannot come soon enough. I like to think that in the future it will streamline systems so that the people who manage the money will make sure that they do not lose it off their bottom line.

The Hon. D.G. PISONI (Unley—Minister for Industry and Skills) (16:59): First of all, I would like to thank the members for Lee, Heysen, Morphett, MacKillop and Hammond for their valuable contributions to the debate on this bill and for their support of the bill. I do note that there was a lot of enthusiasm for the bill on the government's side of the house, particularly from the member for Heysen, who ran his own business as a barrister; the member for Morphett, who was in business; the member for MacKillop, who runs a series of family businesses; and of course the member for Hammond, who is in business.

There is one common theme: we all know how important cash flow is for business to succeed. Of course, it was a key issue in my business to ensure that I had cash flow. There is a saying in business that cash is king. Without cash, your business is crippled. People I knew or had an association with when I was in business often say to me that the job I have now must be stressful, but I say to them, 'No, it is nowhere near as stressful as small business because small business is full of stresses about cash flow, about managing money and about paying your commitments.' When the government does not pay on time, it makes that problem even bigger for you.

This is just one of the small measures we are taking to change the focus here in South Australia. The new government loves the business sector. We love people making money. We love people making a profit because we know that there is a benefit for the whole community as those businesses grow. When businesses make profit, they grow. When businesses grow, they employ more South Australians. We are doing two things: we are removing those barriers for businesses to grow in South Australia by making it easier for them and, obviously, now we have put a much stronger emphasis on the payment of accounts to businesses here in South Australia.

This is not what the Labor Party offered with their Late Payment of Government Debts (Interest) Act 2013, which was really nothing more than an illusion of action because the bureaucratic process to get payment of interest for late payments put people off. People have much more important things to do than chase $20, $30, $40 or even $100 of interest, particularly if they are running businesses that have larger turnovers.

Turnover is no indication of your profit. Tell that to a pharmacist who has to buy a drug for $5,000 and makes only $7.50 on the prescription. They are not going to spend time sending in a separate invoice for the interest when they are paid late by the health system. They are focusing on servicing their clients. They do not have the surplus of staff to enable them to do that because they simply cannot afford it. Their margins are too tight.

The previous government's original act of parliament on this was nothing more than an illusion of action. They heard the cries out there from the business community and set this up. They created this illusion that it was going to be a solution and do something, but of course it did nothing. Basically, what we have done is make it automatic. They can continue running their businesses, employing South Australians, growing their businesses and paying their taxes because there is now pressure on the public sector to make sure that these bills are paid on time because they will add up.

Those payments will add up and if a department ends up losing $1.5 million because they are paying late payment payments automatically because they are not paying their bills on time, I can tell you that Mr Lucas in the other place will not be rolling over and just handing that money over to them. So there is a real incentive now for those bills to be paid on time. It is pleasing to see that all those who spoke on this bill in this chamber and in the other place could see the logic of the bill. Although it might appear to be only a small matter, it has a magnified impact on small businesses in particular in South Australia, but of course any invoice that is $1 million or less benefits from this bill.

It is an automatic process, and it sends a very strong message to the business community: 'We appreciate what you do. We want to do business with you, and we have now lifted our game. We want to make sure that you are properly rewarded for the contractual arrangements that you have entered into with the government and you are not punished simply because you have done your job and we haven't done ours.' I commend the bill to the house.

Bill read a second time.

Third Reading

The Hon. D.G. PISONI (Unley—Minister for Industry and Skills) (17:06): I move:

That this bill be now read a third time.

Bill read a third time and passed.

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