News & Insights

FEDERAL GOVERNMENT TO IMPROVE PAYMENT TERMS FOR SUBCONTRACTORS 

22 August 2018 – This month the Federal Government announced that it would change the subcontractor clause in the Commonwealth standard payment terms to include payment terms of 30 days or less, a move that is hoped will ease cash flow stress experienced by small businesses across the country on the Government’s payroll.

The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, said at the time of the announcement that, “In addition to this, the same obligation is to be included in every secondary subcontract. This means the payment term of 30 days or less will be in every “Contractor” and “Subcontractor” contract the “Prime Contractor” employs.”

Carnell  added, “Late payments affect a small business’ cash flow, impacts on business growth and in worst case scenarios, can put a business out of operation. This clause will be part of the Commonwealth ClauseBank, which provides pre-drafted contract terms for use in existing contracts or in customised contracts. The clause also determines that only relevant obligations are included in subcontracts instead of all obligations from the main contract. The 30 days or less payment time and inclusion of only relevant subcontractor obligations is a significant step in the drive for fairness and balance in Commonwealth projects. We expect all Australian government departments and agencies to use this clause in contracts and give small businesses and contractors peace of mind, financially and mentally, when working with government.”

These changes, designed to speed up payments to contractors and subcontractors, will be well received, especially among businesses currently supporting the Federal Government’s push to deliver a long list of infrastructure projects up and down the country.