The Australian Government recently announced an initiative to develop a standard definition of ‘Australian business’ within the Commonwealth procurement framework.
What is considered an Australian business is currently unclear and can change depending on the department. In some cases, a company is considered Australian if it has an Australian ABN, even if it is ultimately owned or controlled by an overseas firm. In other cases, a business could be considered Australian if it pays tax in Australia.
Commonwealth procurement rules require government agencies to consider the broader economic benefit to Australia when awarding contracts over $1 million, and it’s hoped that a standard definition will make it easier for government spending to be genuinely directed to local companies.
Furthermore, the Australian Government spent nearly $100 billion across 83,000 contracts in the last financial year, however due to the lack of a standard definition, it’s difficult to gauge how much was spent on local businesses.
Industry Minister Ed Husic said a set definition would ensure it was clear when money was being spent locally, “bringing clarity to how an Australian business is defined will mean when we say we are awarding money for local procurement, it will flow to the right firms.”
The lack of standard definition has also been problematic for Australian companies looking to win government contracts against large multinationals that have an office in Australia.
Finance Minister Senator Katy Gallagher said, “[having a standard definition] is an important step which will give us better data on how procurement contracts are awarded and how Australian businesses can be better supported.”
Looking to resolve the issue, the Department of Finance has developed a consultation paper providing an overview of the Commonwealth procurement framework and the potential use of an Australian business definition within this context.
The consultation paper provides information on a range of business-related definitions that are currently being used by government entities, and outlines various factors, such as business location, taxation and ownership, that could be considered in the development of a definition for use within the procurement framework. Submissions to the consultation close on Friday 25 October 2023.