Explanatory Memorandum
(Circulated by authority of the Minister for Employment, Skills, Small and Family Business, Senator the Hon Michaelia Cash)Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Payment Times Reporting Bill 2020
Payment Times Reporting (Consequential Amendments) Bill 2020
Both Bills are compatible with the human rights and freedoms recognised or declared in the international instruments listed in clause 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
The Payment Times Reporting Bill requires large businesses with over $100 million in annual total income to biannually report on their small business payment times and practices. The Scheme will draw on a taxation legislation definition of small business as entities with annual turnover of less than $10 million.
These reports will be published on a public website, the Payment Times Reports Register, allowing small businesses to make more informed decisions about which large businesses they will supply to. Greater transparency will also incentivise large businesses to pay their small businesses on time.
A Payment Times Reporting Regulator will be established to administer the Scheme. The Regulator will have powers to gather information and publish it on the register, along with the ability to enforce compliance with the reporting requirements. Large businesses who fail to give a report, fail to maintain payment records, or provide false and misleading information may contravene a civil penalty provision. Reporting entities may also be directed to undertake independent audits where there is a reasonable suspicion of an entity's wrongdoing in relation to the reporting requirements.
To complement the Payment Times Reporting Bill and ensure the Scheme operates as intended, consequential amendments will be made to the Taxation Administration Act 1953. The Payment Times Reporting (Consequential Amendments) Bill (the Consequential Amendments Bill) amends the Taxation Administration Act 1953 to specify the circumstances in which certain tax information can be disclosed by the Commissioner of Taxation to the Regulator of the Scheme.
Human rights implications
The Payment Times Reporting Bill engages the following human rights:
- •
- the right to protection from arbitrary or unlawful interference with privacy;
- •
- the right to a fair and public hearing;
- •
- the right to be presumed innocent until proved guilty according to law;
- •
- the right to work; and
- •
- the right to freedom of opinion and expression.
The Consequential Amendments Bill engages the following human rights:
- •
- the right to protection from arbitrary or unlawful interference with privacy.
Penalty provisions
Assessment of civil penalties
Civil penalty provisions may engage criminal process rights under Articles 14 and 15 of the International Covenant on Civil and Political Rights (the ICCPR) regardless of the distinction between criminal and civil penalties in domestic law. This is because the word 'criminal' has an autonomous meaning in international human rights law. When a provision imposes a civil penalty, an assessment is therefore required as to whether it amounts to a 'criminal' penalty for the purposes of Articles 14 and 15 of the ICCPR.
The inclusion of civil penalties and infringement notices in the Payment Times Reporting Bill enables the Regulator to enforce compliance with the reporting requirements by pursuing financial penalties rather than through prosecuting criminal offences.
The penalties could be characterised as regulatory in nature as they primarily seek to deter non-reporting and misreporting, and aim to encourage compliance with the Scheme. Further, the penalties are restricted to people in a specific regulatory or disciplinary context, rather than being directed at the public at large.
Lastly, the nature of the penalties is proportionate to the size of the industry being regulated, which means they are not so severe or high as to be considered 'criminal'. They are proportionate to the size and resource level of eligible entities, noting that entities obliged to report under the Scheme are those with an annual total income of over $100 million. Given the size of businesses that will be covered by these provisions, this approach will ensure that the penalties retain a deterrent effect for large entities.
Accordingly, the civil penalty provisions in the Payment Times Reporting Bill should not be considered 'criminal' for the purposes of international human rights law.
Right to privacy
Article 17 of the ICCPR forbids arbitrary or unlawful interference with a person's privacy. However, interference may be permissible if it is in accordance with the provisions, aims and objectives of the ICCPR and is reasonable in the circumstances. To this extent, any limitations proposed by the either the Payment Times Reporting Bill or Consequential Amendments Bill must have a legitimate objective, be rationally connected to this objective and be proportionate.
This Payment Times Reporting Bill establishes a requirement for large business to report their payment terms and practices for small business, to be published on a public register. Allowing information to be made public fulfils the transparency objective of the Payment Times Reporting Bill by ensuring small business and others have access to information on large business payment performance, so they can make informed financial decisions on who they provide goods or services to.
The information to be included in a Payment Times Report will be restricted to aggregate payment information and does not identify a large businesses' payment practices at the individual small business supply level. In so doing, the Payment Times Reporting Bill encourages rights to privacy under Article 17 by protecting the commercial interests of the large businesses' supply chain while also protecting small business from potential commercial disadvantage in being identified as 'small'.
The Payment Times Reporting Bill also includes specific information management provisions that are designed to give large businesses confidence that the information they give to the Regulator outside of a Payment Times Report, such as evidence substantiating their total income if they want to cease being a reporting entity, will not be disclosed except in certain circumstances.
Further, the Payment Times Reporting Bill includes a power for the Regulator to not publish information on the register if it is not in the public interest, and specifically having regard to whether the information is 'personal information' under the Privacy Act 1988. This will give the Regulator the ability to not publish personal information given to the Regulator as part of a Payment Times Report.
The right to privacy under Article 17 may be limited where the limitation is lawful and not arbitrary and where it is reasonable, necessary and proportionate to achieving a legitimate objective. The Payment Times Reporting Bill limits the right to privacy in that it allows for personal information to be released in certain circumstances, for example, for the purpose of proceedings before a court or tribunal, enforcement related activities or to meet a requirement under another Australian law.
The Payment Times Reporting Bill's limitation of the right to privacy has a clear legal basis. The legislation will be publicly accessible and accompanied by detailed guidance so that affected persons have adequate information about how the Bill may limit their right to privacy.
The Payment Times Reporting Bill does not confer unfettered discretion on those who will administer the Scheme. Information can only be used and disclosed as specified in Division 2 of Part 5 of the Bill. The information that can be used and disclosed is clearly prescribed and limited to that information of most importance to achieving the legitimate objectives of the Bill.
The Consequential Amendments Bill will allow for the Taxation Commissioner to disclose certain taxation data to the Regulator for the purpose of administering the Scheme. This information will be subject to important privacy and confidentiality safeguards.
Both Bills are compatible with the right to privacy.
Right to a fair and public hearing
This Payment Times Reporting Bill proposes the use of civil penalty proceedings and infringement notice provisions as compliance mechanisms. These draw upon Parts 4 and 5 of the Regulatory Powers (Standard Provisions) Act 2014, such that infringement notices must display the right to bring the matter to a court and the entity is able to elect to have the matter heard by a court instead of paying the fine. Further, civil penalties can only be applied upon the order of a Court after a public hearing on liability under the relevant civil penalty provisions. No procedural or criminal process rights that currently exist are amended by this Bill.
This Payment Times Reporting Bill is compatible with access to a fair and public hearing by a competent, independent and impartial tribunal established by law.
Right to be presumed innocent until proven guilty
Article 14(2) of the ICCPR recognises the right to be presumed innocent until proven guilty according to law when charged with a criminal offence under.
Strict liability offences are those in which guilt can be established regardless of intent, and therefore are potentially in violation of 14(2). The Payment Times Reporting Bill creates one strict liability offence: this is the offence relating to unauthorised disclosure of protected information.
The Strict and Absolute Liability Report tabled by the Australian Law Reform Commission notes that the imposition of strict liability may be justified for various reasons. The applicable reason here is to ensure the integrity of a regulatory regime. Additionally, the strict liability created by the Payment Times Reporting Bill meets the consideration that it should only apply for offences where the penalty does not include imprisonment and is less than 60 penalty units for monetary penalties.
In strict liability offences where there is public interest in regulation being observed and it can be reasonably expected that the relevant entities are aware of their duties and obligations, the prosecution only needs to prove the physical elements of the offence. A reverse burden then exists for the reporting entity to make out a defence. This is appropriate as the elements of the offence are objective and the penalty is minor and deterrent in nature. This is particularly the case for the offence in this Bill, where Commonwealth officials should be aware of their obligations regarding use of disclosure of protected information.
A strict liability offence may in principle be consistent with Article 14(2) of the ICCPR if it is clear that it pursues a legitimate objective and is reasonable, necessary and proportionate in achieving that objective. The Australian Government Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers indicates this test is met when the matter is peculiarly within the knowledge of the defendant and where it is significantly more difficult and costly for the prosecution to disprove than for the defendant to establish the matter.
This Payment Times Reporting Bill is compatible to the right to be presumed innocent until proven guilty.
Right to work
Article 6 of the International Covenant on Economic, Social and Cultural Rights recognises the right to work, which includes the right to gain a living through freely chosen or accepted work. Article 7 recognises the right of everyone to the enjoyment of just and favourable conditions of work, including remuneration which provides all workers with fair wages and a decent living for themselves and their families.
Long (after 30 days) and late payment times affect the cash flow of small businesses owed the outstanding debt. A 2019 analysis of more than 76,000 small business by AlphaBeta, showed the quantum of long payments from large to small businesses is around $77 billion per year. This equates to a $7 billion transfer of working capital transferred from small to large business each year.
The need to cover this shortfall in their working capital constrains the ability of small business to hire, invest and grow, and leads to higher bankruptcy and exit rates. It also impacts the mental health of small business owners. Accordingly, late payments can limit the extent to which small businesses and their employees can access just and favourable conditions of work.
It is intended that the publication of large business' payment times information will encourage large businesses to improve their payment performance, and enable small business to make more informed decisions about potential customers. This will transmit benefits across the economy as smaller businesses paid on time are able to pay their own suppliers on time.
This Payment Times Reporting Bill promotes and is compatible with the right to work.
Right to freedom of expression
Article 19(2) of the ICCPR protects freedom of expression in any medium, for example written and oral communications, the media, public protest, broadcasting, artistic works and commercial advertising. The right protects not only favourable information or ideas, but also unpopular ideas including those that may offend or shock, subject to limitations.
The Payment Times Reporting Bill limits the right under 19(2) by imposing criminal and civil penalties to unauthorised use or disclosure of protected information. In particular, the Bill aims to restrict a person's ability to use and disclose information gathered in administering the Scheme.
The right to freedom of expression is not absolute, and Article 19(3) of the ICCPR specifies the legitimate aims which any restriction on freedom of expression should pursue. In this case, this Bill's limitation is necessary to the scheme's operation and directed at a legitimate objective. The objective is to protect a reporting entity's privacy and reputation, in particular, information that is not already authorised under this Act to be released publicly.
Entities who give such information are entitled to understand the circumstances in which it can be disclosed, and in which it cannot be, and to have associated penalties associated with unauthorised disclosure. It is also proportionate to the level of reputational damage that could be caused to the business through the unauthorised use and disclosure of information which is not authorised by this Act to be disclosed, except for in certain circumstances.
Further, this restriction is proportionate in that it only limits the freedom of a select class of persons (persons who receive information as part of administering this Act, rather than the public at large) from releasing certain kinds of information (protected information) in certain circumstances (those which are not authorised under this Act).
This Payment Times Reporting Bill is compatible to the right to freedom of expression.
Conclusion
Both Bills are compatible with human rights because they promote the protection of human rights and to the extent that they may limit human rights, those limitations are reasonable, necessary and proportionate.