The federal government is committing its large contractors to pay bills under $1 million that are owed to small businesses within 20 days.
In addition, companies with revenue in excess of $100 million will also have to disclose annually how often they pay small businesses on time.
The new policy covers the 3000 largest businesses in Australia, including foreign companies and government entities, as part of Canberra's plan to assist small and medium businesses by improving cash flow.
Prime Minister Scott Morrison says the issue of slow payments had been consistently raised by small and medium businesses.
"With the digital economy, these things can move faster - and they need to," he said at the Business Council of Australia dinner in Sydney on Wednesday night.
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"It's an important productivity driver to ensure small business is not used as a bank."
The Commonwealth has already committed to paying invoices of less than $1 million within 20 days from July 2019, with large businesses seeking to tender for government contracts required to do the same.
The proportion of federal contracts under $20 million going to small businesses will also increase, to 35 per cent.
Several large businesses are already committed to paying within 30 days as part of the BCA's supplier payment code introduced in 2017.
