Small business concerns about regulatory red tape are growing faster than their fears about cash flow and falling customer demand, according to a new report from the NSW Small Business Commissioner.
According to a survey of more than 1,000 small businesses across the state, concerns about red tape — in other words, the money and time spent complying with the law and business regulation — increased 10% between July 2022 and August 2024.
By contrast, fears for cash flow, commonly identified as a top priority for small businesses, rose 7%, as did concerns about consumer spending in a softening economic environment.
Just over half of all respondents said complying with federal, state, and local government rules around small business became harder over the past 12 months.
Only 2% said it has become easier.
The new report, entitled Rightsizing Regulation, frames the cost of compliance as a critical matter for small businesses.
Naturally, the monetary cost of compliance tends to increase as businesses become more complex.
But the report notes certain thresholds — like when a business takes on employees for the first time — can dramatically increase the time and cost associated with regulatory compliance, even for businesses that remain very small.
The findings suggest well-meaning rules designed to protect small businesses, consumers, and communities are not always fit for purpose, according to Commissioner Chris Lamont.
“From licensing frameworks to impractical food labelling rules and complicated government systems, small businesses face regulations they claim are not designed with them in mind,” Lamont wrote in his foreword to the report.
While acknowledging the complexity of drafting regulations fit for businesses of every size, the report makes nine key recommendations to improve the experience of small businesses trying to do the right thing.
Chief among them is a plan to install a two-stage impact assessment process into NSW’s Better Regulation Framework.
The report states incorporating small business views before a policy direction is set, and then fine-tuning the final result through feedback from small businesses, could lead to better outcomes for the businesses those rules cover.
Additionally, every time a new policy necessitates a Regulatory Impact Statement Better Regulation Statement, the relevant department should produce a Small Business Impact Statement to document how the proposal might hit the SME community.
“Improving regulation does not mean sacrificing consumer protection or broader market fairness,” Lamont added.
“In fact, well-crafted regulation benefits everyone—consumers, communities, and businesses alike.
“Better regulation means designing rules that meet the needs of all stakeholders, including small businesses.”
You can access the report here.
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Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
