Andersen GinnyBUSINESS PAYMENT PRACTICES BILLSecond ReadingHon GINNY ANDERSEN (Minister for Small Business): I present a legislative statement on the Business Payment Practices Bill.ASSISTANT SPEAKER (Hon Jenny Salesa): That legislative statement is published under the authority of the House and can be found on the Parliament website.Hon GINNY ANDERSEN: I move That the Business Payment Practices Bill be now read a second time.Thank you Madam Speaker. As the New Zealand economy recovers from COVID-19 and the recent extreme weather events that we've seen particularly on the East Coast it is more important than ever that we support small-business owners and operators who are the bedrock of our country's economy and also so ingrained within our local communities. Timely payment for goods and services delivered is crucial for the financial health of any business and especially New Zealand's small businesses. Recent years have seen some improvements in business payment times but this movement while positive is marginal and low. Since taking on the small business portfolio I've heard from many small businesses right across New Zealand that delays in receiving payment are hurting their cash flow increasing their stress and inhibiting their business growth.Larger firms are often set in a position to take it or leave it when making payments and are making use of the advantage of their size. That advantages themselves at the expense of those smaller suppliers. When this happens small suppliers often feel unable to ask for more reasonable terms powerless for fear of losing their income. Furthermore when the bill payer doesn't meet the terms they've agreed to the small business affected may not be able to do much about it.Research from Xero is interesting. It says that almost half of all invoices are paid late in New Zealand. Again the perception of a power imbalance often is too great for the small-business owner to risk upsetting their large customer. If small businesses rely on large payers for a lot of their revenue they will be anxious not to rock the boat as their livelihood may well be at stake. This is preventing a significant segment of our business ecosystem from realising their full potential. The effects of poor payment behaviours can run through supply chains and have consequences for the broader economy—for example higher cost on capital or unnecessary insolvencies. In 2019 the Small Business Council reported that among the big issues facing small businesses it considered timely payments was top of that list. The council said it had problems with payment practices and they found that they were particularly difficult to deal with given the current tools available to them and a new approach was needed.The bill being debated today will deliver that change. The Business Payment Practices Bill will establish a disclosure regime that brings transparency to business to business payments and practices in New Zealand. Small businesses will have better information to inform their decision making when engaging in new customers. They will be able to decide who they wish to do business with. Large businesses who care about their reputations will want to ensure that their business practices stand up to scrutiny. The bill requires entities with more than $33 million in revenue and $10 million in third-party expenditure to have to disclose information about their payment practices twice each year. The Government needs to lead by example so the bill will also apply to Government entities just as much as the private sector. Disclosed information will include information relating to payment times reporting entities payment terms and conditions. This information will be submitted and stored on a publicly available searchable register administered by the Ministry of Business Innovation and Employment (MBIE). The register will be free for users to access.I would like to take a moment to thank the people and organisations that took their time to submit on this piece of legislation and the Economic Development Science and Innovation Committee for their work that they did on this bill. I am pleased that the committee has unanimously recommended some important changes to make this legislation more effective. These include more clarity on what counts as payment information more specificity around which reporting entities the new transparency regime will apply to measures to minimise compliance costs and a range of technical improvements. I thank them for their work and those officials that have supported their work to happen as well.One other important change the committee has recommended was to provide a six-month transitional period before reporting entities must start reporting and collecting this information. I acknowledge that many reporting entities will need to make changes some of them quite technical to their payment systems to be able to adapt to the new transparency requirements. This is unavoidable. To make it easier for reporting entities to provide the required transparency the select committee has suggested that initially only reporting entities with $100 million of annual revenue will need to report. Many of these companies will already be reporting in Australia which has a similar requirement in place. So they will need to be well placed to extend this transparency to their New Zealand operators and to be quite frank that's only fair.The bill provides for the appointment of a registrar who will be responsible for establishing and maintaining the register and the associated compliance and enforcement functions. It will also provide infringements penalties and criminal offences for any contraventions of its obligations. The bill's penalties would of course only apply to the most wilful and problematic offending. In Australia which operates a similar regime reporting entities were provided with a 12-month compliance holiday before its regime's compliance tools came into effect. We are not proposing that here but none the less the primary compliance lever will still be reporting entities' desire to enhance their reputation as good business operators who pay fair terms. Reporting entities that offer good payment terms will want to shout this out from the rooftops no doubt. The transparency this regime requires will enable them to be able to do that. Favourable comparisons will be made against reporting entities that offer less desirable payment terms or are slow to provide the required transparency.Important details of the bill will be determined through secondary legislation. Most importantly the bill's regulations will specify the exact information reporting entities will need to disclose. MBIE officials are working on those draft regulations now and to this end are consulting with stakeholders subject matter experts in both New Zealand and Australia where a similar regime is already in place. I'm confident that the regulations will achieve the right balance making sure that useful information is made available to small businesses while also keeping in mind minimising compliance costs for large ones and enabling the smoothest possible implementation phase. I intend to publish the regulations as soon as possible after the bill receives Royal assent. This will ensure that reporting entities have as long as possible to get to grips with the new requirements and make any required systems or process changes that they need to do to IT systems.I'd like to conclude by acknowledging the select committee the department officials the select committee staff for their hard work and for all those who took the time to submit on this bill. I commend it to the House.ASSISTANT SPEAKER (Hon Jenny Salesa): The question is that the motion be agreed to.