Contracts for Fair Payments
Contracts to which the provision applies
The fair payments provisions will apply to contracts entered into from 1 July 2007 where the value of the goods or services does not exceed $3 million.
While it is acknowledged that a $3 million threshold will capture some contracts involving larger businesses, it is considered as the appropriate minimum requirement to ensure the likely coverage of all contracts involving small and medium businesses.
Standard Contract Clause
Agencies should include an appropriate fair payments clause in these contracts. Clauses should provide for:
- payment of debts within 30 days
- penalty interest for late payments
- requirement for the supplier to give notice of the late payment in order to receive penalty interest
- suspension of the 30 day payment period in the event of a dispute
Fair Payments Clause
A standard clause has been drafted, as follows, for use by departments and agencies. Each agency should consult its legal officers to ensure that the clause is appropriately tailored on a case-by-case basis.
1.1 [The Agency] will, on demand by [the Contractor], pay simple interest on a daily basis on any overdue amount, at the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 (Vic).
1.2 For the purposes of clause 1.1, "overdue amount" means an amount (or part thereof) that is not, or is no longer, disputed in accordance with this Agreement:
(a)that is due and owing under a tax invoice (as defined in the A New Tax System (Goods and Services Tax) Act 1999 (Cth)) properly rendered by Contractor in accordance with this Agreement
(b)which has been outstanding for more than 30 days from the date of invoice or the date that the amount ceased to be disputed, as the case may be