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Australian Small Business and Family Enterprise Ombudsman

During the 2018–19 financial year, the Office of the Australian Small Business and Family Enterprise Ombudsman (Ombudsman’s Office) reached its third year of operation and continued to mature in terms of its status, outreach and expanded roles.

The Ombudsman’s Office was established in March 2016 with the commencement of the Australian Small Business and Family Enterprise Ombudsman Act 2015. The Ombudsman has dual functions to both directly assist and advocate for small business and family enterprise.

In respect of the assistance function, the Ombudsman provides direct and tailored support for Australian small businesses and family enterprises with business disputes. Direct assistance is provided to enable small businesses to access low cost and speedy dispute resolution, whether a dispute is with government or another business.

In respect of the advocacy function, the Ombudsman is an independent advocate for small business and family enterprise, with legislative powers to inform and advise Australia’s lawmakers and regulators on small business issues and operations. The Ombudsman has power to conduct research and inquiries on the request of the Minister for Employment, Skills, Small and Family Business as well as self-generated inquiries into important issues for the small business sector.

A primary aim of the Ombudsman is to ensure that the voice of small business is heard across government and to inform policy processes so that the needs of small business and family enterprise can be met. The operations of the Ombudsman are informed through its assistance to small business as well as extensive relationships across business and government, including the following:

  • The Ombudsman’s Policy Forum draws together 28 industry and professional associations from across the sector, with the group also separately meeting via seven working groups to progress key issues:

– Access to justice

– Contracts and unfair contract terms

– Cyber security

– Digitisation and the National Broadband Network

– Energy

– Human capital

– Workplace relations

  • The Ombudsman chairs the Federal Regulatory Advisory Group, which on a quarterly basis brings together the Ombudsman’s Office and several key Commonwealth regulators in the sector (Australian Competition and Consumer Commission, Australian Securities and Investments Commission, Australian Taxation Office and Fair Work Ombudsman)
  • The Small Business Commissioner’s Group, which includes the Ombudsman and representatives from each of the states, meets on a quarterly basis and which also meets with the Federal Regulatory Advisory Group at least twice annually to ensure good communication between the state commissioners and Commonwealth regulators
  • The Ombudsman participates in and engages with various consultative groups, including peak small business meetings held by the Australian Competition and Consumer Commission and the Australian Taxation Office
  • The Ombudsman engages with various business forums, conferences and small business roadshows (including with accounting and other industry bodies).

The Ombudsman has begun expanding these relationships by creating an online consultation network so that small businesses, industry associations (and their members) and others can provide direct feedback into policy issues.

Alongside this broadened network, the Ombudsman also operates a Small Business Hub that provides free desk and meeting spaces for small businesses, family enterprises and industry associations so that they can gain better access to government and the public sector while in Canberra.

Expanded roles

During the 2018–19 financial year, a number of new roles were added to the Ombudsman’s functions.

  • On 5 December 2018, the Ombudsman became responsible for the administration of mediation adviser and dispute resolution adviser services under the franchising, horticulture and oil codes of conduct. Formerly the Ombudsman worked closely with the provider of dispute resolution under these codes by referring appropriate matters. Integrating this role into the Ombudsman’s assistance function means the Ombudsman can now provide far broader support for code disputes.
  • On 1 March 2019, the Ombudsman began providing the Small Business Tax Concierge Service, which supports and assists small businesses in their disputes with the Australian Taxation Office. Principally, this service assists small businesses to decide whether to lodge an application to the Administrative Appeals Tribunal and provides tailored subsidised legal advice to the small business from a panel of tax litigation experts. The small business expertise of the Ombudsman is critical in ensuring that the service is efficient and carefully tailored for small business needs.
  • On 12 March 2019, the Australian Small Business and Family Enterprise Ombudsman Act 2015 was amended to provide the Ombudsman with the power to give direct assistance to small business in obtaining a no adverse costs order in proceedings to recover the amount of any loss or damage as a result of contraventions of the Competition and Consumer Act 2010. This power came into effect on 1 July 2019.

Advocacy

During the 2018–19 financial year, the Ombudsman conducted a broad range of research and inquiries into a number of key issues affecting small business and family enterprise. The research and inquiries were both conducted at the request of the Minister and self-generated by the Ombudsman.

The Ombudsman completed the following inquiries at the request of the Minister during the period (available via asbfeo.gov.au):

  • Review of the Australian Taxation Office’s enforcement of debt recovery (April 2019) The review investigated ATO enforcement of disputed debt in matters before the Administrative Appeals Tribunal (AAT). The Ombudsman found that ATO debt recovery action happens in a sizable number of cases before the AAT (at least 12 per cent) and that such action can severely reduce a business’s ability to prosecute its case and carry on its business. In particular, the use of garnishment (specifically enduring garnishee notices) can have a crippling impact on businesses. Key recommendations of the review include introducing the ability of the AAT to issue a stay order on ATO debt recovery action; external oversight and approval of garnishee notices; and expanding the Ombudsman’s review to cover broader ATO debt recovery actions.
  • Review of payment times and practices (April 2019) This review measured the effects of late and extended payment practices on the cash flow of small businesses and family enterprises in Australia. Small business supplier payment terms and conditions were investigated for over 250 large businesses, while more than 2,400 survey responses were received from small businesses identifying late payment problems for over 1,300 businesses. The review found a persistent trend of payment times being extended beyond usual industry standards. Recommendations pinpointed the need for greater transparency and a place for expanded operation of the unfair contract terms legislation and industry codes. The need for deemed statutory trusts in the construction sector was another key recommendation.

The Ombudsman also provided regular quarterly updates to the Minister on the operations of the
Ombudsman’s Office and relevant legislation, policies and practices that affect small business (available via asbfeo.gov.au).


Research and inquiries conducted at the Ombudsman’s own initiative during the reporting period
addressed a broad range of issues, including:

  • inquiry into the Small Business Fair Dismissal Code
  • review of cascading deemed statutory trusts in the construction sector
  • completion of the first phase of inquiry into small business access to justice, to pinpoint issues and approaches; and commencement of the second phase to make recommendations
  • initial research into the use of family trusts by small business
  • ongoing review of the changes in the Australian Banking Association’s Banking Code of Practice 2019 and how these are implemented in practice. Although the new code puts into practice most of the recommendations in the Ombudsman’s small business loans inquiry report (2017), various provisions of the code remain problematic due to excessive bank discretion in following code provisions and even findings of the Banking Code Compliance Committee itself, as well as the restriction of loan coverage being capped at $3 million (rather than $5 million, which is more appropriate for capital intensive small businesses such as farms and building and manufacturing firms).

In advocating for best practice, the Ombudsman continued cross-government work in respect of completed inquiries, including on small business loans, payment times and practices, and affordable capital for SME growth. In addition, the Ombudsman received eight official requests for review of regulation impact statements and made 108 submissions on legislation and regulation affecting small businesses and family enterprises, including:

  • the Fair Entitlements Guarantee scheme
  • the National Energy Guarantee
  • the retail compliance guidelines
  • small business tax concessions
  • the online safety regulatory framework
  • the Research and Development Tax Incentive
  • operation of the Australian Public Service
  • small business procurement commitments
  • industry codes including the Food and Grocery Code of Conduct and the Banking Code of Practice
  • employment services
  • consumer safeguards
  • commercialising business ideas
  • telecommunications services
  • the black economy
  • modernising business registers
  • unfair contract terms
  • intellectual property laws
  • modernising the Australian Business Number system
  • international trade agreements
  • security of payments reform
  • collective bargaining
  • prevention, investigation and prosecution of industrial deaths
  • combating illegal phoenixing activity
  • support for small business in regional economies
  • the consumer data right
  • the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry
  • e-invoicing
  • skilled migration and skills shortages
  • the Australia Business Securitisation Fund
  • the review of the vocational education and training sector
  • reauthorisation of the Australasian Performing Rights Association
  • the payment times reporting framework
  • employee share schemes.

Assistance

During the 2018–19 financial year, the Ombudsman received 8,001 enquiries (more than double the previous financial year), as well as 113,476 visits to the Ombudsman’s website (asbfeo.gov.au).

Of the 8,001 enquiries, 6,602 were formal requests for assistance in accordance with the Australian Small Business and Family Enterprise Ombudsman Act 2015. Given an effective commencement date of 1 July 2019 for small businesses to obtain a no adverse costs order, no formal requests for assistance in relation to these orders were received during the period.

The Ombudsman worked closely over the period with a range of Commonwealth, state and territory agencies on a wide variety of requests for assistance. For example, there were numerous requests for assistance in respect of matters affecting large numbers of small businesses in sectors such as franchising, finance and health, where the Ombudsman and a number of agencies worked cooperatively to address issues. Cooperation with agencies during the reporting period did not require entry into any formal cooperative arrangements (as outlined in section 70 of the Act).

Over the period, the Ombudsman dealt with a significant volume of cases where commercial behaviours of one party affected large numbers of small businesses and did so in very serious ways. This included seeking to lock small businesses into extended financial arrangements in respect of advertising and business equipment supply, as well as uncommercial franchising arrangements. The Ombudsman also received a range of complaints about government infrastructure projects and other government actions that had widespread and ongoing adverse impacts on the conduct of ordinary small business operations. Further work is continuing in these areas.

Table 16. Resolution of disputes

Resolution

Count

Percentage of total

Referred to appropriate agency: Australian Financial Complaints Authority, Fair Work Ombudsman etc)

2,413

36%

Referred to state small business commissioners

501

8%

Resolved by Ombudsman direct action

126

2%

Resolved by Ombudsman with provision of information or referral to professional advice

2,101

32%

Case in progress with Ombudsman

1,376

21%

Referred to alternative dispute resolution (including under the franchising, horticulture and oil codes)

85

1%

Total

6,602

100%