A review will examine how to get big business to pay their invoices in a "fair and reasonable" time, after recent data revealed small businesses are waiting up to four months to be paid for work.
The Albanese government will launch an independent review of the Payment Times Reporting Act next year, led by former Labor minister Craig Emerson, in a bid to ensure the country's 2.5 million small businesses are paid on time.
"You're talking about subcontractors and trainees, you're talking about local suppliers - supplying some of the bigger organisations in Australia," Small Business Minister Julie Collins told reporters on Tuesday.
"It's fair and reasonable for them to be paid on time."
"We don't think that small businesses should be carrying this burden and we want to see more small businesses paid on time."
Small businesses are often left out of pocket for months on end, with one-in-four big businesses taking up to 120 days to pay their invoices, according to data from the Payment Times Reporting Regulator released earlier this month.
The government will wait for Dr Emerson to deliver his review, but Ms Collins says businesses should be able to expect their invoices be paid within 30 days.
The Business Council also recommends payments should be made within 30 days, but seven out of ten big businesses are ignoring that timeframe.
The review will consider a number of issues - including whether maximum payment periods could be implemented, and if a period of 10, 20 or 30 days might be appropriate, or even five days where electronic payments are used.
It will also look at how different payment lengths could be applied to different sectors, and consider a possible penalty scheme.
Dr Emerson, a former small business and trade minister under the Rudd and Gillard governments, will lead the review which will be delivered by mid-2023.
