Build up Small Businesses

Design rationale

Small businesses typically have limited pricing power, limited access to hedging, and limited capacity to absorb rapid cost increases. Thise temporary uplift would function as a counter-cyclical stabiliser, increasing fiscal pressure on large firms when inflation is above the target band, with the aim of reducing inflation persistence and volatility that disproportionately disrupts small business operations.

Key design questions for scrutiny

1. Scope definition matters because corporate groups can be structured in ways that shift where profits are recorded across related entities.
2. Choice of inflation measure affects timing and responsiveness, because published inflation data is periodic and may not track sector-specific price pressures.

Structurally controlled risks

1. A “large corporation” definition can create boundary behaviour, including incentives to shape headcount reporting, group structure, or timing at year-end to avoid being classified as large, particularly where a business sits close to multiple thresholds at once. Yet because the Corporations Act test requires meeting at least two of three criteria (employees plus either revenue or assets), simple single-metric gaming is constrained and many near-boundary manoeuvres need to be sustained across more than one dimension, while consolidated-group treatment reduces the scope to split entities purely to stay below the line.

Market-controlled risks

1. Large firms may be expected to try to preserve after-tax margins and respond by lifting prices during uplift periods, particularly in concentrated markets where customers have fewer alternatives. But since more influential businesses would be raising their own tax more by raising prices, the uplift is levied on aggregate profits rather than on each sale, it unwinds automatically when inflation returns to band, and any attempt to embed it into prices remains constrained by competitive pressure and demand response once the uplift switches off, there are multiple incentives not to respond in this way.
2. A temporary uplift could be expected to reduce after-tax returns enough to defer discretionary investment, particularly where projects have short payback horizons and boards are already cautious in volatile conditions. Yet because the uplift is conditional and self-reversing, and because the same high-inflation environment that activates it typically drives financing costs and demand uncertainty that overwhelm marginal tax differences, investment decisions are less likely to pivot on the uplift itself, especially for long-horizon capital allocation.
3. A lagged inflation statistic could be expected to produce mistiming, with the uplift switching on after inflation momentum has already turned or lingering after conditions have eased, creating a risk of policy “after-effects” that don’t match the live economy. Even so, a public and rule-based trigger makes the regime predictable in advance, sustained above-band inflation is visible in real-world pricing trends before official releases, and the automatic unwind limits persistence once inflation returns to band, which together reduces the scope for prolonged mismatch driven by discretionary delay.
4. Inflation episodes can be expected to vary in responsiveness, because genuine supply shocks can force price rises regardless of tax settings and a profits-based uplift has limited leverage over the underlying cost driver. Still, where inflation persistence is being amplified by price-setting behaviour — including premature price rises based on expected shocks rather than realised input costs — the uplift creates a counter-incentive for captured firms to move early, since lifting prices ahead of costs can contribute to above-band inflation that raises their own tax burden during the activation period, while the temporary and condition-bound design contains the downside in supply-shock episodes to the duration of above-band inflation rather than embedding a permanent setting.

Enforcement-controlled risks

1. A conditional uplift could be expected to intensify avoidance and timing behaviour, including profit shifting, intra-group reclassification, and income or expense timing around anticipated activation periods, particularly among firms with sophisticated tax planning capacity. In this case, the same predictability that improves transparency also enables forward planning before published inflation prints, so the structure does little to self-limit the incentive to minimise exposure and the practical constraint comes primarily from the reach and enforceability of existing integrity settings rather than from the uplift design.

Interaction with other reforms

This measure interacts most strongly with competition policy and corporate tax integrity settings, because market power and avoidance capacity affect whether stabilisation pressure is absorbed, passed through, or minimised.

Implementation outline

Legislation would define corporate coverage, group treatment, the reference inflation statistic, the baseline company rate, and the method for applying and unwinding the temporary uplift, supported by alignment with existing anti-avoidance frameworks.

Design rationale

Small businesses often deliver labour, goods, or services well before they are paid, while larger customers can use delayed payment as a de facto source of working capital. This shifts financing responsibility back onto the party with greater balance-sheet capacity by making payment timing a binding obligation rather than a discretionary commercial practice.

Payment discipline framework

1. The rule requires payment within a fixed statutory maximum period, so delayed payment cannot be treated as a routine commercial bargaining tool.
2. Automatic penalties matter because the obligation is only likely to change behaviour if paying late becomes materially less attractive than paying on time.
3. The rule depends on clear trigger events for when the payment clock starts, because large customers will otherwise have incentives to shift delay into invoice acceptance, approval staging, or procedural review.

Commercial power asymmetry

1. Large customers may be expected to treat delayed payment as a low-visibility way to push financing pressure onto smaller suppliers that have less bargaining power and less access to working capital. A binding maximum payment period changes that relationship by limiting the extent to which payment timing can be dictated by the stronger party after the work has already been done.
2. Some large customers may be expected to respond by pressing harder on price or favouring suppliers with stronger balance sheets. But where prompt payment discipline applies across major buyers, delayed payment becomes less available as a hidden commercial advantage and suppliers are less likely to compete by informally financing their customers through tolerance of long payment periods.

Risk and failure modes

1. Large customers may be expected to look for ways to convert late payment into procedural delay by stretching invoice approval processes, disputing invoices more aggressively, or redefining when payment is treated as due. The rule is less vulnerable to this where the payment clock is tied to clear statutory trigger points and where genuine invoice disputes are distinguished from ordinary delay.
2. Avoidance pressure may also arise through procurement intermediaries, related entities, or contract structures designed to keep the substantive commercial relationship while shifting formal liability. Integrity depends on whether the rule follows the real purchasing relationship rather than narrow contractual form.
3. The rule can also underperform if small suppliers must individually pursue every breach against repeat customers with much greater leverage. In practice, the deterrent effect depends heavily on automatic penalty accrual, accessible complaint pathways, and credible regulator-backed enforcement, because formal rights alone are often weak where suppliers fear retaliation or loss of future work.

System interaction

This measure interacts with unfair contract term rules, procurement standards, and small business dispute pathways, because payment discipline is easier to sustain where large customers cannot contract around invoice timing or use dispute processes as a cover for delay.

Implementation outline

Legislation would define the covered large-customer class, protected small-business supplier class, maximum payment period, payment-clock trigger, treatment of disputed invoices and staged contracts, and the form of automatic penalties, supported by complaint and enforcement powers that do not rely entirely on supplier-initiated litigation.

Design rationale

In concentrated markets, large firms can often increase profits through market control more easily than through better products, lower costs, or improved service. That power can operate downstream, through control over customers, or upstream, where dominant buyers can push prices, risks, or contractual terms onto smaller suppliers with few practical alternatives.

We would alter that incentive by making excess market dominance progressively less attractive as a profit strategy, so returns are more closely tied to innovation and competitive performance rather than scale alone.

Market concentration discipline

1. Additional company tax liability would be linked to the extent that a firm exceeds a competitive market-share threshold where its market power is greatest. For consumer-facing firms this will usually be their share of sales, while intermediary processors and other major purchasers may instead be assessed by their share of purchases.
2. The ACCC would determine the relevant market according to the products or services being traded, geographic constraints, available alternatives, and whether the firm's competitive power is principally exercised as a buyer or seller.

Innovation and competitive behaviour

1. Dominant firms may be expected to respond by seeking higher margins through internal productivity gains, service improvements, or more efficient operations rather than simply expanding market share further. That change in incentive is the point: profits become easier to grow through better business performance than through continued concentration once the additional tax rate begins to scale upward.
2. This can also create pressure for large firms to shed underperforming assets or avoid acquisitions that add scale without improving productivity, because growth that pushes further past the competitive threshold carries a rising tax cost. Where that occurs, market space opens more readily for smaller competitors and new entrants without requiring constant case-by-case intervention to produce the same effect.

System interaction

This measure interacts closely with merger control, misuse of market power rules, and ACCC market definition practice, because its practical effect depends on how sector boundaries are drawn and how concentration is assessed alongside existing competition law.

Risk and failure modes

1. Firms may be expected to challenge sector definitions, restructure across related entities, or diversify across adjacent markets in ways that reduce their measured exposure without materially changing underlying market power. Integrity depends on whether the rule follows substantive economic control and market position rather than narrow corporate form or convenient classification.
2. The tax can also underperform if competitive thresholds are set too high to change behaviour, too low to distinguish genuine dominance from ordinary scale, or too inconsistently across sectors to sustain confidence in the system. In practice, the discipline of the tax depends less on the headline mechanism than on credible threshold-setting and review processes.

Implementation outline

Legislation would define the covered corporate class, require sector allocation and competitive threshold determination, specify how market share is measured for tax purposes, and establish integrity treatment for corporate groups, related entities, and multi-sector firms, with ACCC and tax administration roles clearly separated but operationally aligned.

References

Australian Competition and Consumer Commission — Merger assessment guidelines | Australian Competition and Consumer Commission — Perishable agricultural goods inquiry report

Design rationale

Australia has largely maintained de facto net neutrality through market incentives, existing telecommunications settings, and commercial expectations of open internet access rather than through a dedicated statutory guarantee. That has helped keep providers from overtly discriminating between lawful services in practice, but it leaves neutrality dependent on conditions that can change as markets consolidate, vertically integrate, or develop stronger incentives to monetise network control. We would turn that market norm into an enforceable baseline so internet access remains a general-purpose service rather than a gatekeeping tool shaped by commercial preference.

Network neutrality framework

1. The core obligation is that lawful content, applications, and services must not be blocked, degraded, or privileged based on payment, ownership, or affiliation. This matters because the harm arises when infrastructure operators can influence downstream markets without having to outperform rivals in those markets themselves.
2. The rule depends on distinguishing legitimate technical network management from commercial discrimination, because providers still need to manage congestion, security threats, and service reliability. The framework is only workable if those operational exceptions are narrow, objective, and not easily repurposed as a cover for preferential treatment.

Platform access and competitive discipline

1. Without neutrality rules, large digital businesses can gain an advantage not only through scale or product quality but through arrangements that make competing services slower, harder to access, or more expensive in practice. A neutrality rule limits that pathway by keeping the network layer from becoming a paid filter over downstream competition.
2. Smaller online firms, creators, and publishers are more exposed to discriminatory carriage because they cannot easily negotiate favourable treatment or absorb degraded access. Preserving equal transmission conditions makes competition more dependent on the service itself rather than the bargaining power of the provider behind it.

Risk and failure modes

The rules can underperform if they assume today’s relatively neutral market behaviour will continue without recognising that current restraint is not grounded in a clear legislative framework. Internet providers may still be expected to shift discriminatory behaviour into technical classifications, interconnection arrangements, zero-rating structures, or quality-of-service categories that preserve commercial preference without obvious blocking or throttling. Integrity therefore depends on whether the rule follows practical effect rather than only overt forms of discrimination, and whether exceptions for congestion, safety, or specialised services are kept narrow enough that future incentives cannot erode neutrality through indirect means.

System interaction

This measure interacts with telecommunications regulation, competition law, and digital platform markets, because discriminatory network treatment can alter competition conditions even where downstream services are formally open to entry.

Implementation outline

Legislation would define prohibited discriminatory treatment, set narrow technical-management exceptions, establish transparency requirements for traffic management and service quality, and give regulators power to investigate practical discrimination across retail, wholesale, and affiliated service arrangements.

Design rationale

Large digital platforms derive structural advantage from collecting and retaining far more personal information than is needed to provide the service the user actually requested. We would shift digital markets away from surveillance-based competition by limiting excess data extraction and giving users enforceable control over the information platforms hold about them.

Data minimisation framework

1. The central rule is that collection, retention, and commercial use of personal data must be limited to what is strictly necessary to deliver the requested service. This matters because many current platform advantages are built not on better core services but on the ability to convert broad user monitoring into advertising, profiling, and behavioural leverage.
2. User rights to access, correction, portability, and deletion matter because limiting data extraction alone is not enough where large platforms already hold extensive information and can use retention or lock-in to preserve advantage. The package therefore combines forward limits on data use with rights that let users contest and reduce existing informational asymmetries.

Platform power and competitive effects

1. Excessive data collection can function as a barrier to competition because large platforms accumulate behavioural insights, targeting capability, and switching friction that smaller firms cannot match without adopting the same extraction model. Constraining that advantage changes the basis of competition from data capture toward service performance and user trust.
2. Strong portability and deletion rights can reduce lock-in where users would otherwise remain tied to dominant platforms because their history, contacts, preferences, or stored content are difficult to move or meaningfully erase. Those rights are only effective, however, if they are usable in practice rather than nominal rights buried behind slow, opaque, or selective processes.

Risk and failure modes

1. Large platforms may be expected to reclassify optional data collection as “necessary”, rely on bundled consent, or fragment services so surveillance functions appear operationally indispensable. Integrity depends on whether necessity is defined objectively and enforced against the real function of the service rather than the platform’s preferred business model.
2. Those rights can also underperform if access, portability, correction, or deletion rights exist formally but are slowed, obscured, or made technically incomplete in practice. Effective privacy reform therefore depends on enforceable standards for response time, data format, scope, and regulator-backed remedies rather than rights that users must negotiate alone.

System interaction

This measure interacts with competition policy, consumer protection, and digital platform regulation, because personal data operates both as a privacy issue and as a structural input that can entrench platform dominance.

Implementation outline

Legislation would define necessity-based collection limits, regulate retention and commercial-use standards, establish enforceable user rights over personal data, set practical standards for portability and deletion, and give regulators power to audit data practices and penalise evasive service design.

Design rationale

Small businesses are often protected on paper from unfair contract terms, but those protections can be weak in practice where challenging a term requires legal costs, delay, and procedural effort far beyond what a smaller firm can safely absorb. We would make unfair contract protections usable in real commercial relationships by creating a faster and lower-cost pathway that matches the scale of the businesses affected. This direction is consistent with ASBFEO’s access-to-justice work, which identified the absence of a cost-effective and timely binding pathway as a major weakness in small business enforcement.

Dispute access framework

1. A dedicated pathway is needed because ordinary court processes are often too slow, expensive, and procedurally burdensome to provide meaningful protection against standard form contract abuse in lower-value commercial disputes.
2. Capped costs and defined resolution timelines matter because the main advantage held by the stronger party is often not the legal strength of the term itself, but the ability to drag out the dispute until challenge becomes commercially irrational.

This approach aligns with ASBFEO’s recommendation that small businesses need a more practical route to enforce unfair contract term protections where mediation does not resolve the dispute.

Commercial discipline and bargaining effects

1. A credible low-cost dispute pathway can alter behaviour before disputes even arise, because large firms become less able to assume that one-sided terms will go unchallenged simply because the supplier cannot afford to contest them.
2. The pathway is an enforcement backstop, not a route for turning every contract disagreement into a formal proceeding, and should improve bargaining discipline around standard form agreements and repeat supplier relationships.

Risk and failure modes

1. The pathway can underperform if cost caps are too high, procedures become too legalistic, or resolution timelines stretch far enough that the stronger party still gains leverage through delay. The effectiveness of the reform depends on whether the process remains genuinely simpler and faster than ordinary litigation in practice rather than only in formal description.
2. Larger counterparties may also be expected to shift pressure into pre-contract negotiation, contract classification, jurisdiction clauses, or procedural objections designed to keep disputes out of the simplified pathway. Integrity therefore depends on whether access is determined by the substantive commercial reality of the contract rather than narrow drafting tactics.

System interaction

This measure interacts with unfair contract term law, small business commissioner functions, and ombuds or tribunal jurisdiction settings, because the value of a streamlined pathway depends on whether existing legal rights can actually be enforced through it.

Implementation outline

Legislation would define the covered small-business class, eligible contract disputes, available remedies, cost caps, time limits, and the body responsible for hearing disputes, supported by simple filing processes and enforceable outcomes.

Design rationale

Many small businesses enter standard form agreements without affordable legal support, even where the contract governs critical issues such as payment timing, liability allocation, termination rights, or dispute pathways. We would reduce preventable contract harm by making basic compliance support available before businesses commit themselves to terms they may not fully understand or be well placed to resist. It builds on the existing preventive logic already reflected in ACCC small-business contract guidance and ASBFEO’s advice that businesses should seek help early rather than only after problems escalate.

Preventive compliance framework

1. Standardised templates and plain-language guidance matter because many small businesses need practical support at the point of signing rather than abstract legal protections after a dispute has already emerged.
2. Low-cost pre-execution review matters because the most efficient contract dispute is the one that never needs to happen, and many harmful terms are easiest to address before the agreement is executed and commercial dependence deepens.

Commercial capability and market effects

1. Preventive support can improve bargaining outcomes even where the small business does not have equal negotiating power, because the stronger party is less able to rely on confusion, time pressure, or legal opacity as a substitute for fair dealing.
2. This also helps smaller firms participate more confidently in routine commercial contracting without requiring every agreement to be escalated to full private legal advice, which is often unaffordable relative to the value of the contract.

Risk and failure modes

1. Preventive support can underperform can underperform if templates become outdated, guidance remains too generic, or review services are too slow, too narrow, or too oversubscribed to be useful at real commercial speed. In practice, the value of preventive compliance support depends on whether it is current, accessible, and responsive enough to match business decision timelines.
2. It can also underperform if stronger counterparties treat regulator-issued templates as optional while continuing to impose take-it-or-leave-it agreements built around terms that small suppliers still cannot realistically refuse. This support therefore works best as a complement to dispute rights and unfair contract enforcement rather than as a substitute for them.

System interaction

This measure interacts with unfair contract protections, dispute pathways, and procurement standards, because pre-signing compliance support is most useful where small businesses also have credible options if unfair terms are later contested.

Implementation outline

Legislation or intergovernmental agreements would define agency responsibilities for templates, guidance, and review services, set minimum service standards for review accessibility and turnaround, and establish processes for updating standard materials to reflect changing law and market practice.

Design rationale

Intellectual property law is intended to reward innovation and disclosure, but it can also be used to entrench market power where rights are too broad, too long, too detached from active use, or too expensive to challenge. We would narrow the gap between the formal purpose of intellectual property and the way it is sometimes used in practice against smaller firms that lack the resources to contest overreach. Part of this direction is consistent with existing Australian policy work, including the Productivity Commission’s recommendation that Australia adopt a fair use exception.

Innovation and disclosure discipline

1. Restricting patent claims to specific disclosed implementations matters because rights become less legitimate as an innovation incentive when they extend far beyond what the applicant has actually taught the public how to do.
2. Requiring active use prior to enforcement matters because exclusion is harder to justify where the rights-holder is not commercialising, licensing, or otherwise genuinely deploying the protected asset and is instead relying on the right primarily as a blocking tool.

Access, experimentation, and market entry

1. Broader fair-use rights matter because smaller firms, creators, and researchers often face disproportionate chill effects where ordinary experimentation, commentary, interoperability, or incidental use carries legal uncertainty.
2. Capped-cost dispute procedures matter because even well-founded defences are often commercially useless if the cost of asserting them exceeds what a smaller business can bear.

The fair-use component is consistent with prior Productivity Commission advice that Australia modernise its copyright exceptions framework through adoption of fair use.

Risk and failure modes

1. This reform package can underperform if rights are narrowed unevenly across different forms of intellectual property, leaving broad exclusionary leverage intact through adjacent regimes, licensing structures, or portfolio-based enforcement strategies. Its practical effect therefore depends on whether the package operates coherently across patents, copyright, and related commercial control mechanisms.
2. It can also underperform if active-use requirements, fair-use protections, or capped-cost procedures are drafted narrowly enough that sophisticated rights-holders can comply formally while preserving most of the same strategic advantage in practice. The discipline of the reform depends on whether the law targets functional overreach rather than only the most explicit forms of abuse.

System interaction

This measure interacts with competition law, small business dispute processes, and innovation policy, because intellectual property rules affect not only creative reward but also who can enter markets, challenge incumbents, and build on existing ideas.

Implementation outline

Legislation would define revised protection periods, tighten claim-scope rules, establish active-use conditions for enforcement, regulate long-duration exclusive licensing, broaden fair-use exceptions, and create capped-cost procedures for smaller firms, with judicial and administrative guidance aligned to the new standards.