The Government has announced that it will repeal the Business Payment Practices Act 2023 (Act). The Act established a disclosure regime requiring certain large businesses to report on how long they take to pay invoices. The Act is being repealed before many of the provisions come into force in late May 2024, ten months after it received royal assent in July 2023.
The Act would have required large entities who met the ‘Payment Threshold Test’ to disclose information about their payment practices. These reporting entities would have to disclose the time taken to pay invoices and the proportion of invoices paid in full, as well as other information relating to payment practices and policies. You can read our article which covers other aspects of the then-Bill, here.
In announcing the repeal of the Act, Small Business and Manufacturing Minister Andrew Bayly acknowledged that large market players imposing long payment terms and routinely paying invoices late was a major problem. However, the Minister said the Act would not be an effective solution, and that it “would impose unnecessary compliance costs to over 3000 businesses upgrading their ICT systems”.
The Minister cited a review of the Australian equivalent legislation, the Payment Times Reporting Act 2020. That review found that awareness of the scheme was low among small businesses, with less than 1% accessing the register. Further, the review noted that the object of the scheme failed to recognise that small businesses are not able to pick and choose among prospective large-business customers due to the inherent power imbalance between them.
While the New Zealand Act will soon be repealed, the Minister noted the Government will work with BusinessNZ to create an industry-led voluntary code to ensure small businesses are paid on a timelier basis. Additionally, government agencies will be required to adopt faster payment times, including for eInvoices.
We will continue to watch this area with interest and keep you informed of further developments.
This article was co-authored by Tom Kennedy, a Solicitor in our Corporate team.
