A move to ensure large businesses pay small to medium enterprises (SMEs) within 20 days as a condition of future Federal Government contracts is being hailed as a major win for the SME sector.

Backed up by the requirement by large businesses with $100 million turnover to publish payment times in their annual reports, it is a game-changer, says Australian Small Business and Family Enterprise Ombudsman Kate Carnell.

“This is already a requirement in the UK and it is important that Australia learns from the UK experience to ensure compliance and transparency,” she said.

“We are mid-way into a review on payment times and thousands of SMEs are telling us through our online survey that late and extended payments are affecting their cash flow and ability to sustain their businesses.

“SMEs make up 99 per cent of businesses in Australia and they employ over of our workers.

“Just one late payment makes a difference to a small business’ bottom line and we are finding some small businesses have up to 20 companies extending their payment times or just paying late, which is unacceptable.”

Prime Minister Scott Morrison outlined the changes at the Business Council of Australia annual dinner in Sydney on Wednesday night.

Ms Carnell also welcomed the government’s commitment to pay invoices under $1 million within 20 days and to help SMEs compete for 35 per cent of all government contracts up to $20 million.

“This will deliver a significant increase in the amount of government work going to SMEs, which will increase capacity and innovation in the sector.

“All initiatives announced last night reflect the recommendations in our 2017 Payment Times and Practices Inquiry, which identified late and extended payments as one of the most significant handbrakes on small business productivity and a burden on the economy.

“We echo the call on all state governments to adopt these practices; invest in our SMEs so they can grow, innovate and boost employment.”

Meanwhile the Australian Subcontractors Association is calling for tax concessions from the Federal Government and the Australian Taxation Office to help subcontractors impacted by major construction companies failing to pay accounts.

The group said small subbies could not afford to carry large debts imposed by unpaid bills and that additional tax obligations could force them over the edge into liquidation.