This Bill introduces a mechanism to bar large businesses from winning major government contracts if they consistently fail to pay their small business suppliers within an average of 30 days. By defining such entities as "restricted payers," the legislation seeks to use the Commonwealth's $71 billion procurement budget as leverage to improve payment times across the Australian economy.
The reform responds to findings that late payments are a primary cause of small business insolvency and that existing transparency-based reporting schemes have been insufficient to overcome the power imbalance between large corporations and their smaller suppliers.
The Public Governance, Performance and Accountability Amendment (Supporting Small Businesses to be Paid on Time) Bill 2026 amends the PGPA Act 2013 to introduce a "restricted payer" regime for Commonwealth procurement. A restricted payer is defined as a reporting entity whose "average payment time to small business suppliers... exceeded 30 calendar days for each of three consecutive reporting cycles" or who failed to lodge required reports under the Payment Times Reporting Act 2020 [Explanatory Memo page 5].
The Bill's substantive provision prohibits the Commonwealth from entering into procurement contracts above a prescribed threshold with restricted payers. This mechanism aims to create a "direct and ongoing incentive for large businesses to maintain good payment practices across their operations" [Explanatory Memo page 4]. The status is designed to be "self-correcting," meaning an entity is removed from the restricted list as soon as it records a single reporting cycle with an average payment time of 30 days or less.
To ensure government operations are not unduly hindered, the Bill provides several exemptions. The Finance Minister may allow procurement from a restricted payer if it is in the "critical national interest," if there is "no reasonable alternative supplier," or if the business enters into a "credible and achievable remediation undertaking" to reach the 30-day standard within 18 months [Explanatory Memo page 6]. Decisions made by the Minister regarding these exemptions are subject to merits review by the Administrative Review Tribunal.
The primary justification for this Bill lies in addressing the "inherent power imbalance" between large corporations and small business suppliers. As noted in the Emerson Review, small businesses often lack the leverage to reject slow-paying customers, effectively being forced to provide "cheap finance" to their larger counterparts at the expense of their own solvency [Explanatory Memo page 2]. By linking government procurement—representing billions in annual spending—to payment performance, the Bill creates a tangible consequence for exploitative practices that transparency measures alone have failed to curb.
From a utilitarian perspective, improving cash flow for small businesses is a matter of national economic stability. Inadequate cash flow is the leading cause of small business insolvency in Australia. By incentivizing a 30-day payment standard, the Bill protects the viability of the small business sector, which is a critical driver of employment and innovation. The "self-correcting" nature of the restricted payer status ensures that the measure is remedial rather than purely punitive, encouraging rapid behavioral change across the broader commercial landscape. The Bill also aligns with international precedents, such as the United Kingdom's Prompt Payment policy, which has successfully required government bidders to demonstrate timely payments since 2019 [Explanatory Memo page 5].
While the goal of supporting small businesses is laudable, this Bill risks introducing significant distortions into the government procurement process. By making payment history a binary condition of eligibility, the Commonwealth may be forced to bypass the most qualified or cost-effective providers for critical projects. Although the Bill includes exemptions for "value for money" and "national interest," the administrative burden of navigating these exceptions and the threat of merits review could lead to risk-averse procurement decisions that ultimately disadvantage the taxpayer [Judgment].
Furthermore, the Bill represents an overreach into the private contractual arrangements of businesses. It penalizes entities for their conduct in supply chains that have "no direct Commonwealth connection" [Explanatory Memo page 4]. This sets a concerning precedent where the government uses its market power to regulate private commercial behavior that is otherwise legal. There is also an epistemic risk that a rigid 30-day average does not account for industry-specific nuances or complex supply chain structures, potentially leading to a "serious deterioration of value for taxpayer money" [Explanatory Memo page 6] by unfairly labeling businesses as "restricted payers" due to statistical anomalies rather than systemic exploitation.
2026-06-22
House of Representatives
Before House of Representatives
SPENDER, Allegra, MP
Unspecified
Competition Policy, Industrial Policy, Financial Regulation