SME champion Kate Carnell AO's advice for small businesses


    The Small Business and Family Enterprise Ombudsman shares her tips to help SMEs navigate business challenges, government policy and the banks.

    With small businesses making 6400 calls for help to solve disputes in the past year, it’s clear Kate Carnell AO FAICD, the inaugural Small Business and Family Enterprise Ombudsman, is filling a need. Most calls to the national office, opened in March 2016, come from Queensland, New South Wales and Victoria. About 40 per cent are from regional businesses, Carnell says, but their problems have the same themes as city ones.

    Issues range from unfair contracts to poor IT services to breaches of intellectual property, slow or no payment, disputes about leasing, or advertising and marketing being not fit for purpose. Carnell’s office helps sort out these disputes. Mostly, callers are not in the wrong; they are just pressed for time and cash, and may often be outgunned by bigger businesses using the slow and costly legal system to get their way — no matter whether it is fair or not.

    Carnell wishes that more small businesses used advisory boards. “My strong message is you need someone with experience to look at every contract you sign,” she says. “In our inquiry into payment times and practices, we found small businesses sign on average nine contracts a year and the average time spent looking at them is two minutes.

    “Small businesses tell me, ‘We can’t afford lawyers every five minutes’. So have an advisory board. People will give small businesses a hand.”

    Carnell was a pharmacist for many years in Canberra. She knows small business owners aren’t stupid. “They think they have no choices,” she says. While her office educates small businesses to stand up for their rights, she fights the policy battles.

    Carnell is appalled by the injustice small businesses face — and by the lack of will among big business leaders to address it. “We’ve adopted a view that as long as it is legal, it is OK,” Carnell says. “Fairness, justice, and doing the right thing is stuff you might talk about at the AGM, but it is not followed through. All of us in business need to take a hard look at this.”

    Born in Brisbane, Carnell rose to public prominence after moving to Canberra. Soon after buying her first pharmacy in the suburb of Red Hill (and later three more), she began advocating for, and changing, her industry. She joined industry and government organisations, and then the Liberal Party. In 1992, Carnell was elected to the ACT Legislative Assembly, becoming Liberal leader in 1993. She was Chief Minister twice during the period 1995–2000.

    “I’ve had many jobs,” she says, “but everything I’ve learned, I learned behind the cash register in my pharmacies.”

    Beating the banks

    Recently, small businesses have had some big wins. For example, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry exposed cases of appalling behaviour of some banks towards small businesses. One example was the Nowra couple who allegedly ended up paying 50 per cent interest (losing their factory in the process) on a CBA foreign currency loan for their export company. They had signed up for the loan at five per cent. Carnell’s office flagged such problems in its first report, an inquiry into small business lending, published in 2016. Carnell has also called for the Royal Commission to spend more time on small business to examine the relationship between banks and administrators and receivers.

    Super powers

    Carnell congratulates the Australian Taxation Office for declaring a (one-off) amnesty (until 23 May 2019) for employers that get behind in their superannuation payments. “It’s great,” Carnell says. “From time to time, small businesses get behind on super. They shouldn’t, but they do. They have a few bad weeks — the council digs up the pavement or some machinery breaks — and they miss some super payments.” Penalties make it hard to recover. Catch-up payments are not tax-deductible and businesses are fined and pay interest for late payments.

    Carnell feels the amnesty doesn’t go far enough; that it is unfair for small businesses to collect taxes such as GST and PAYG for governments, as well as superannuation for super funds, without recompense. Carnell has an alternative idea: the ATO should collect and distribute superannuation. If businesses pay taxes and super in one payment, the ATO can share the bureaucratic load and spot late payments before they mount up.

    Review facility

    The ATO made another concession to small business recently by extending its Independent Review facility. “Since 2013, the ATO has offered a case review service to large business before it issues an assessment. This allows all parties to have a better understanding of the issues and reach an appropriate resolution,” says Carnell.

    Only big companies could request such a review, but the ground rules changed after a recent ABC Four Corners program showing how ATO audits had sent small businesses to the wall. Their only redress was to appeal, a lengthy and costly process most could not afford. Carnell says the review is not entirely independent, as another part of the ATO conducts it, but it does provide a “fresh set of eyes”.

    Red tape

    Unreasonable payment terms and late payments from government and big businesses are also hurting small businesses. The damage caused by slow payment is far-reaching. In 2011, former US President, Barack Obama, introduced a policy to reduce payment terms for government suppliers from 30 days to 15 days. A US study by the National Bureau of Economic Research showed his Quickpay policy increased annual wages by US$6b and employment by 75,000 jobs.

    Carnell wants to shame bad performers with a National Payment Transparency Register, and laments that many of her former business colleagues are prime offenders. “They say, ‘decisions like that are made offshore’, or ‘it’s all about shareholder value’, or ‘yeah, we are looking at that’. In the end, it is about whether you have an absolute obligation to behave in a fair and reasonable way.”

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