In a bid to improve cashflow, the Federal Government will now pay interest due to SMBs as a result of outstanding payments, as part of its efforts to encourage government agencies to pay invoices on time.
Under the changes, small businesses will automatically be paid interest on contracts that haven’t been paid within 60 days – where the interest owed is more than $10 but does not exceed $1 million.
Finance Minister Penny Wong said the changes would encourage government groups to pay on time to avoid having to pay the extra interest.
“Currently businesses have to issue separate invoices to agencies if they want to claim interest on late payments. This can require additional paperwork which means many small businesses don’t bother,” she said.
Although close to 98 percent of the 80,000 contracts between the Commonwealth and small businesses are paid within the specified time, Small Business Minister Brendan O’Connor wants to see these figures improved upon, to lessen the burden on SMBs cashflow.
“We want to build on this relationship and ensure that all invoices are paid within the agreed time frame because it does make a significant difference to a business’s cash flow,” O’Connor added.
The interest will be calculated according to the Australian Taxation Office‘s general interest charge rate, which is currently sitting at 11.37 percent.
Business will still be able to invoice agencies directly after 30 days of late payment as is currently the case.
