New government regulation affecting supply chains - and what you can do to keep up

Felix   |   May 1, 2019

A new Australian Government policy is designed to prevent Black Economy activities from harming the integrity of the supply chain involved in the government's procurement.

The Black Economy Procurement Connected Policy, announced in March this year and set to take effect on 1 July 2019, will require that all businesses tendering for government contracts worth over $4 million provide a Statement of Tax Record (STR). This document, which will only be valid for 12 months at a time, will need to be obtained directly from the Australian Taxation Office (ATO) and provided within four days of the tender submission.

In addition to presenting a satisfactory tax record, businesses will eventually be required to also prove that they comply with other areas such as superannuation and third-party obligations, and to disclose any court order penalties or convictions. Consulting firms and/or tax agents that provide advisory services may also need to submit proof to show that they are in no way involved in the promotion of dishonest tax practices.

What are the motives behind this policy?

The policy states that “Increasing the integrity of Commonwealth Government procurement processes promotes good tax behaviour and creates an even playing field for businesses that comply with their tax obligations.”. Forcing suppliers to prove that they are not involved in illegal practices from the outset will make it easier for purchasers to avoid engaging with the Black Economy unknowingly, which could be a threat to any organisation. In fact, according to a joint statement from Assistant Treasurer Stuart Robert and Finance Minister Mathias Cormann, the integrity of the supply chain can be threatened by illegal supplier practices that purchasers are unaware of during the procurement stage, or even throughout the entire duration of the contract.

A report from the Black Economy Taskforce, released in October 2017, shows that supply chains are becoming more competitive and complex within both the public and the private sector, resulting in added pressure to cut costs. This may result in honest businesses being outbid by tenderers with unrealistically low bids, which are often made possible by their lack of compliance with tax and employment obligations.

How does this policy affect my organisation?

This new policy highlights the importance of visibility and transparency in procurement. Whether your organisation operates in the public or private sector, it is crucial that you have the ability to ensure that all vendors you engage with are compliant with all internal and external regulations.

How can Felix help you keep up?

Felix makes it easy for organisations to differentiate compliant vendors from those that are non-compliant, thus ensuring that all businesses they engage with are in line with internal and external regulations. During the onboarding and pre-qualification stages, an organisation can request that their vendors submit information and documentation to confirm their tax record status, as well as other areas of compliance. Vendors can then be marked in Felix using custom tags - labels communicating unique business attributes - to signal their compliance (or lack of) with regards to that specific area. Alternatively, this information can also be requested during the sourcing stage as a non-financial requirement within an RFx.

Contact us today to find out more about how Felix can help you maintain a compliant supply chain.

Sources: Australian Government - The Treasury (1, 2); Government News

Felix
Felix operates a cloud-based enterprise Software as a Service (SaaS) and marketplace platform for the commercial construction and related industries. Felix connects Contractors and their third-party Vendors, automating and streamlining a range of critical procurement-related business processes.
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