The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) is encouraged by the Australian Government’s response to the Murray Review of Security of Payment Laws, and welcomes the announcement of further action to help ensure tradies and subcontractors are paid on time.
Mr Billson said the Government’s commitment to extend protections against unfair business practices to small businesses, will also help address harmful conduct in the construction sector.
“This is welcome action to support tradies and subcontractors. Cashflow is the oxygen of enterprise and, as small businesses in their own right, those businesses ‘on the tools’ are vulnerable to harm by malicious action from other businesses”, said Mr Billson.
“If those in the building supply chain can’t have the confidence that they will be paid in full and on time, they are facing constant financial insecurity – and they start finding it hard to pay their own subcontractors in time. It’s not fair and the construction sector insolvency number are frightening.
“Our assistance helpline is getting more and more calls from small businesses, tradies and subcontractors worried that not only are their invoices not being paid on time, but that their business customer might never pay as they are insolvent.
“We need to support the smaller players. They need the support of government protections from unfair or harsh behaviour by bigger, stronger players.
“It is soul destroying and grossly unfair for a sub-contractor to see a builder they have done good-quality completed work for choose not to pay and then shut down to avoid paying them – only for the non-payer to reemerge as a new company, with the same directors, coming through unscathed and living the same good life, while the sub-contractor and other suppliers carry the financial pain.
“For some in the construction sector, this illegal ‘phoenixing’ seems to be a business model that is dodgy and damaging. We have had too many sub-contractors contacting us to help them deal with the harm this appalling practice causes. One was hit by this cruel construction industry con four times! It can happen to anyone, even experienced contractors and subcontractors.
“The boost to ASIC funding to identify and take enforcement action on illegal phoenixing will help improve the commercial environment, particularly in vulnerable sectors such as construction.
“ASBFEO has emphasised that active stewardship and effective systems for monitoring, reporting and promptly addressing suspected breaches of the Supplier Code of Conduct are critical to enforcing the positive duty on suppliers to take measures to prevent and discourage breaches”, said Mr Billson.
“Imbalances in the bargaining power of small business means that combating unfair contract terms and unfair trading practices is critical for small businesses who otherwise have limited options.
“Small business also needs to be able to pursue their commercial interests and not rely solely on the hope that the regulator takes up their case in time to help.
“Currently, the cost of legal action means that small businesses simply can’t afford to pursue their legitimate commercial interests. Our proposal to create a Federal Small Business and Codes List in the Federal Circuit and Family Court of Australia provides a low cost and timely way for businesses to enforce their rights.
“We have also been advocating for a ‘Good Business Pays’ recognition as a positive acknowledgement of the vast majority of businesses that pay their suppliers in a timely way, fully meet staff pay and entitlements obligations and properly attend to their tax obligations.
“We need small businesses – tradies and contractors – able to focus on their work, not on whether they will get their fair pay and chasing unpaid invoices when they should be ‘on the tools’.
“Security of payment is vital for small businesses – reliable cashflow is critical both to their survival and to competitive outcomes that benefit consumers, workers and taxpayers”, Mr Billson added.
More information about ASBFEO Policy and Advocacy and Assistance functions is available on the ASBFEO website.
MEDIA CONTACT: 0448 467 178 | media@asbfeo.gov.au