Agile or fragile?
The real cost of over-regulation in Australia
Following a very successful Small Business Summit (kudos to the Small Business Association of Australia), we have compiled a series of articles that highlight the questions and suggested answers from the discussion we contributed to. We hope these articles stir something within every reader so they contact their local Federal MP and ask why no action is being taken.
Small business first thinking
Small businesses power Australia’s economy, yet the regulatory system often treats them as collateral damage.
More than 2.5 million small businesses make up around 98 per cent of all Australian businesses. They provide over 5 million jobs and contribute roughly one-third of the national GDP.
In theory, regulation should protect workers, customers and the environment, while allowing businesses to grow. In practice, complex, overlapping rules act like a disguised tax on work, risk-taking and ambition.
Recent analysis by the Australian Institute of Company Directors estimates that the direct cost of complying with Commonwealth regulation has climbed from 65 billion dollars in 2013 to around 160 billion dollars a year today, equal to about 5.8 per cent of GDP. Australia now ranks second among G7 nations for administrative and regulatory burden, behind only Japan.
The Business Council of Australia’s own work points to a red tape burden now in excess of 110 billion dollars, based on an earlier stocktake of around 86,000 separate regulations, before accounting for recent rule growth.
This is not a marginal issue. It is a structural drag on productivity, a brake on investment and a daily reality for the owner who spends weekends decoding law instead of building their business.
A ‘think small business first’ regulatory culture would treat that $160 billion as an opportunity cost to be reduced over time, not simply accepted as the price of living in a modern economy.
Over-regulation as a disguised tax on ambition
When regulation grows unchecked, it behaves like a tax nobody voted for.
- Compliance behaves like a fixed cost. A new obligation that a 10,000-person corporation can spread across a specialist legal team lands just as hard on a 10-person firm that lacks one.
- Document-heavy regimes around areas like Fair Work and Work Health and Safety do not simply express standards. They generate templates, checklists, forms and records that must be created, updated and defended.
- Owners lie awake worrying they will “get it wrong” despite acting in good faith. That fear pushes many into defensive decisions, such as not hiring, not expanding and not experimenting.
The Small Business Charter of Australia clearly captures this problem. One of its six core objectives is to reduce red tape that becomes a barrier to the establishment and success of micro, small, and medium businesses. When we ignore that objective, we treat compliance time as free. It is not. Every hour spent wrestling with complex law is an hour not spent:
- improving products
- serving customers
- training staff
- exploring new markets
A think small business first regulation approach starts by recognising that time is scarce and valuable. It asks whether the same policy outcomes can be delivered through better design, simpler obligations and smarter enforcement.
The global context: it is not just about wages
Too often, Australia’s competitiveness debate is reduced to wages. The story goes that labour is too expensive, so we cannot compete.
The data tell a different story.
Studies of German industry show that unit labour costs in 2024 were about 22 per cent higher than the average across 27 industrialised countries and around 15 per cent higher than the eurozone average. Yet Germany remains a major exporter of high-value products in automotive, machinery, chemicals, and engineering.
High wages have not stopped German firms from competing. Quality, productivity and a skilled workforce have carried them for decades. The recent concern in Germany is not that wages are too high; it is that bureaucracy and energy costs are eroding the advantages that quality once provided.
That is why the German government has launched a broad modernisation and deregulation agenda. It aims to reduce compliance costs for businesses by around 25 per cent, or roughly 16 billion euros, through faster approvals, digital processes and targeted cuts to paperwork.
Germany is not perfect, but the lesson is clear. High labour costs can coexist with strong exports, where policy also focuses on ease of doing business. A ‘think small business first’ regulation mindset is part of that equation.
Australia’s challenge is similar. Our wages are not uniquely out of line with those of other advanced economies. Our issue is that we combine complex labour, tax, planning, and reporting obligations with slow approvals and limited small-business tailoring. The result is a heavy drag on investment and growth.
Who is doing better with small-business-focused regulation?
Australia is not starting from scratch. There are established international models of think small business first regulation that we can draw on.
European Union: the SME Test and Think Small First
The European Commission’s Small Business Act embedded the “Think Small First” principle in EU policymaking. The practical tool is the SME Test, which requires analysis of how proposed laws will affect small and micro enterprises, and encourages adjustments, exemptions or simplified regimes.
In other words, every significant new rule must pass a think small business first regulation filter before it is adopted.
United Kingdom: Better Regulation and SaMBA
The United Kingdom’s Better Regulation Framework includes guidance and tools to assess regulatory impacts, and has evolved specific methods such as the Small and Micro Business Assessment (SaMBA). These assessments ask departments to consider alternative options, lighter-touch regimes, and transitional arrangements for smaller firms.
While the UK still struggles with complexity in some sectors, the existence of these tools means that thinking small business first, regulation is at least part of the design conversation.
New Zealand: regulatory stewardship and cutting red tape
New Zealand has pursued a regulatory stewardship agenda, requiring agencies to treat the systems of law they administer as long-term assets that must be maintained, simplified, and modernised. Government speeches and strategy documents openly link cutting red tape and removing obstacles to rebuilding the economy.
That approach is not perfect, but it is consistent. Regulatory agencies are expected to ask whether existing rules still work, and whether new ones are proportionate.
Singapore: a one-stop office for SME red tape
Singapore has created a dedicated SME Pro Enterprise Office under Enterprise Singapore to act as a one-stop entity for small and medium enterprises that face long or complex government processes. The office helps SMEs navigate rules, escalate feedback and push for more streamlined approvals.
This is a ‘think small business first’ regulation in institutional form. Instead of leaving each firm to fight its own battle with agencies, the system provides a champion who can identify patterns and address root causes.
Where does Australia sit?
On paper, Australia scores well on “regulatory quality” measures. World Bank indicators place Australia at the top of the Oceania region, with a regulatory quality score of about 1.94 on a scale from -2.5 to 2.5.
In practice, the cost of navigating that regulation is growing quickly. As noted earlier, AICD analysis puts the annual cost of complying with Commonwealth regulation at around 160 billion dollars, up from 65 billion in 2013, with Australia now second in the G7 for administrative and regulatory burden.
The Business Council’s Better Regulation work suggests a red tape burden of more than 110 billion dollars based on an earlier stocktake, with more than 80,000 separate instruments across levels of government.
Small business is the shock absorber for this system:
- Almost all Australian businesses are small. Around 97 per cent have fewer than 20 employees.
- They produce roughly one-third of GDP and employ two in five private sector workers.
- Yet most policy design is still framed around large employers, large projects and large balance sheets.
The Small Business Charter of Australia describes the decline of small business as a “growing emergency”. It highlights red tape, high personal and corporate taxes, difficulty raising capital and skill shortages as key barriers to growth.
In this context, a ‘think small business first’ regulatory policy is not a “nice to have”. It is a practical step to prevent our most dynamic firms from becoming fragile.
The Small Business Charter: a ready-made lens
The Small Business Charter of Australia provides policymakers with a clear, principle-based framework. It aims to:
- recognise the importance of micro, small and medium businesses
- provide greater opportunities for their participation
- support sustainability and growth
- protect against early failures
- reduce red tape as a barrier to success
Those objectives align naturally with a ‘think small business first’ regulatory approach. The Charter does not call for a lawless environment. It calls for evidence-based policy and a structural commitment to treating small businesses as central to the national economy.
A simple policy shift would be to adopt the Charter formally across jurisdictions and require that:
- Every new regulation must demonstrate how it advances at least one Charter objective.
- Every regulatory impact statement must include a think small business first regulation section, explicitly assessing costs, benefits and alternatives for small enterprises.
- Regulatory agencies are required to report annually on their progress against Charter objectives, not just on the number of rules they administer.
This is not about weakening protections. It is about strengthening the discipline that sits behind new obligations.
Designing a Think Small Business First Regulation test
What would a practical test of a small business’s first regulation look like in Australia?
Start with “function versus purpose”
Before drafting a clause, lawmakers should ask:
- What is the real-world harm we are trying to prevent or address?
- What is the minimum function a rule must perform to reduce that harm?
- Is regulation the only or best way to deliver that function?
A think small business first regulation lens would treat guidance, model documents, industry codes and education as valid first options, rather than jumping straight to prescriptive law.
Default to guidance, education and accreditation
In many areas, especially in employment and financial literacy, it may be cheaper and more effective to require business owners to demonstrate competence than to impose paperwork requirements.
A think small business first regulation framework could:
- mandate periodic continuing professional development in key areas such as industrial relations, safety, privacy and basic financial management
- recognise accredited training or coaching programs as a way to satisfy certain obligations
- reduce the need for bespoke policies where a business can show that staff are trained, systems are in place, and risks are actively managed
Instead of forcing every café, plumber and allied health practice to maintain a thick manual of rarely read policies, we could certify that the owner understands and applies core principles.
Scale obligations to size and risk
A one-size-fits-all regime is the enemy of think-small-business-first regulation.
Rules should be scaled along two dimensions:
- organisation size, measured by headcount and turnover
- risk profile, based on industry, complexity and potential harm
For example:
- A one-person consultancy should not face the same level of HR documentation obligations as a 300-person manufacturer.
- A low-risk professional services firm should have simpler safety documentation than a high-risk construction site, even if headcounts are similar.
The Charter’s focus on proportionate treatment and reduction of red tape provides the policy cover to design such graduated obligations.
Use sunset clauses and stocktakes.
Think small business first, regulation also requires discipline about the existing “stock” of law.
- New regulations could include sunset clauses, requiring renewal after a set period, based on fresh evidence.
- Governments should commit to periodic stocktakes, with a bias to remove or consolidate overlapping rules.
- Any regulation that survives a stocktake should have a clear, updated small business justification.
This approach is already visible in parts of Europe and New Zealand. Australia can adapt those methods to our own legal and federal context.
Shifting from punishment to guidance
A common criticism from owners is that the system feels designed to punish the many for the sins of the few.
A ‘think small business first’ regulatory mindset would reverse that default.
- For the majority of businesses that act in good faith, the government’s primary role should be guidance, support and simple guardrails.
- Heavy oversight, bespoke corrective action plans and close supervision should be reserved for the minority of firms that cause real harm or show repeated negligence.
Courts and regulators could play a more constructive role by:
- using enforceable undertakings that require education, system upgrades and mentoring
- ordering targeted CPD for owners and managers
- approving practical, tailored compliance plans instead of generic penalty schedules
This keeps the full weight of the system focused on those who deserve it, while giving others room to be agile.
It is still regulation. It is think small business first regulation.
Why complexity kills innovation
Complex systems favour incumbents. When laws are dense and scattered, those with in-house legal teams and large budgets adapt. New and small entrants struggle.
The Small Business Charter highlights the disproportionate burden that reporting, documentation, information, and logistics requirements place on small firms with limited resources.
The innovation cost is real:
- Owners delay adopting new technology because they worry about new compliance risks.
- Potential exporters stay local because trade, customs and standards rules feel impossible to navigate without specialist help.
- Start-ups pivot away from regulated sectors entirely, even where they see clear customer problems to solve.
In contrast, a think small business first regulation culture can stimulate innovation:
- Clear, simple baseline rules let founders understand what “good” looks like.
- Safe harbour arrangements for experimentation, within guardrails, encourage testing of new ideas.
- Regulators can run sandboxes and pilot schemes, with small businesses at the table, before scaling full regulation.
If we want Australian firms to occupy niches in advanced manufacturing, clean energy, digital services and health, we cannot afford to choke them with excessive process.
Agile or fragile: what is at stake for Australia
Small business is often described as the “engine room” of the economy. Ombudsman analysis notes that small businesses employ about two-thirds of workers when medium enterprises are included and generate close to one-third of GDP.
Yet many owners report feeling more fragile than agile. They face:
- rising input costs
- tighter labour markets
- global competition from scaled and often state-backed firms
- a growing stack of regulatory obligations
If the cost of regulation has reached $160 billion a year, even small productivity gains from simplification could free tens of billions for wages, investment, and innovation.
Think of the ‘think small business first’ regulation as a national agility program:
- Reduce wasted effort and duplicated reporting.
- Design rules so that doing the right thing is the easiest thing.
- Build confidence for owners to hire, expand, export and invest.
The question is not whether Australia will have regulation. The question is whether we will continue to accept complexity that quietly taxes ambition, or choose clarity that supports it.
Do we want our small businesses to be agile or fragile?
A practical way forward
If governments are serious about small business, there are several concrete steps they can take in the following policy cycle.
- Formally adopt the Small Business Charter of Australia as a guiding document across jurisdictions, with public commitments to its six objectives.
- Embed a think small business first regulation test in all regulatory impact statements, modelled on the EU SME Test, the UK’s SaMBA and New Zealand’s stewardship expectations.
- Create a national small business regulation office, similar to Singapore’s SME Pro Enterprise Office, with a mandate to receive complaints, identify systemic issues and drive cross-agency solutions.
- Reform specific high burden regimes, such as aspects of Fair Work and WHS documentation, to focus on outcomes, competence and scaled obligations rather than sheer volume of paper.
- Commit to measurable targets, such as reducing compliance costs as a share of GDP over time, and publish transparent metrics.
Each of these steps would make ‘think small business first’ regulation a reality rather than a slogan.
How SBAAS can help you navigate and influence regulation
For individual businesses, the national debate can feel distant. The reality of ‘think small business first’ regulation starts inside your own operation:
- understanding which obligations truly apply to you
- simplifying your processes and policies so they work in practice
- building the financial and strategic insight to grow despite the noise
At SBAAS, we work with enterprises of all sizes across Australia to design systems that meet regulatory requirements without overwhelming teams. We also help owners and leaders contribute constructively to policy consultations and industry initiatives, so their experience shapes the next generation of rules.
If you want to explore how a ‘think small business first’ regulatory mindset can be applied within your organisation, or if you need hands-on help untangling existing complexity, we would welcome a conversation.
You can book an appointment or learn more about who we are and how we work by visiting the SBAAS About Us page.
Sources
- Australian Institute of Company Directors – “$160 billion and counting: The cost of Commonwealth regulatory complexity” – https://www.aicd.com.au/news-media/research-and-reports/economic-cost-of-regulatory-complexity.html
- Business Council of Australia – “Better Regulation Report” – https://assets.nationbuilder.com/bca/pages/13329/attachments/original/1756277809/BCA_Better_Regulation_2025_Report_WEB.pdf
- Small Business Association of Australia – “Small Business Charter of Australia (Updated July 2024)” – https://smallbusinessassociation.com.au/wp-content/uploads/2024/08/SBAA-CHARTER-UPDATED-JULY-2024-v1-FINAL.pdf
- Australian Small Business and Family Enterprise Ombudsman – “Contribution to Australian Business Numbers” – https://www.asbfeo.gov.au/small-business-data-portal
- News.com.au – “Huge risk to Aussie jobs revealed” – Back Australia series – https://www.news.com.au/finance/business/manufacturing/quick-and-the-dead-huge-risk-to-aussie-jobs/news-story/da6be867a1901fe5369213593ada94eb
- Daily Telegraph – Bruce Billson’s opinion on small business and the Economic Roundtable – https://www.dailytelegraph.com.au/business/opinion-economic-roundtables-blind-spot-could-cripple-nations-engine-room/news-story/cd1014897206cc7d7a57b052a44eadb2
- World Bank / Trading Economics – “Regulatory Quality: Estimate – Australia, New Zealand, Germany” –
- European Commission – “SME Test for better regulation” and SME Policy Institute – “Think Small First” –
- https://single-market-economy.ec.europa.eu/smes/sme-strategy-and-sme-friendly-business-conditions/sme-test_en,
- https://www.e-sme.eu/en/the-sme-test/,
- https://www.businesseurope.eu/wp-content/uploads/2025/02/2022-11-29_sme_test_benchmark_2022_final-804-1.pdf,
- https://trade4msmes.org/guides/think-small-first/
- UK Government –
- “Using the Better Regulation Framework” – https://www.gov.uk/government/collections/using-the-better-regulation-framework;
- Regulatory Policy Committee – “Small and Micro Business Assessments (SaMBA)” – https://assets.publishing.service.gov.uk/media/6915abc5db01ecfcf96fc8af/RPC_Case_Histories_-_SaMBA_Sept_2025.pdf
- New Zealand Treasury and MBIE – “Regulatory Stewardship Resource” and “Regulatory Systems Stewardship Strategy 2023-2028” –
- Enterprise Singapore and Singapore Government – “Establishment of the SME Pro-Enterprise Office” and related coverage –
- https://www.enterprisesg.gov.sg/resources/media-centre/media-releases/2024/september/mr03224_establishment-of-the-small-and-medium-sized-enterprises-pro-enterprise-office,
- https://www.channelnewsasia.com/singapore/smes-office-red-tape-regulations-rules-government-agencies-business-growth-transformation-4627446,
- https://www.businesstimes.com.sg/singapore/new-office-help-smes-navigate-provide-feedback-regulations
- German Government and advisory sources – “Programme for Bureaucracy Reduction and Better Regulation” and Bureaucracy Relief Act IV –
- https://www.bundesregierung.de/breg-en/issues/better-regulation/the-programme-in-brief-470892,
- https://www.bundeswirtschaftsministerium.de/Redaktion/EN/Dossier/cutting-bureaucracy.html,
- https://www.twobirds.com/en/insights/2024/germany/buerokratieentlastungsgesetz-iv,
- https://kanzlei-slr.de/en/fourth-bureaucracy-relief-act/,
- https://www.ggi.com/news/employment/germans-fourth-bureaucracy-relief-act,
- https://www.indexbox.io/blog/german-government-approves-modernization-agenda-to-boost-economy/
- Reuters and IW studies – “German labour costs higher than other industrialised countries” and “An International Comparison of Unit Labour Costs” – https://www.reuters.com/markets/europe/german-labour-costs-higher-than-other-industrialised-countries-study-shows-2025-08-27/, https://www.iwkoeln.de/en/studies/christoph-schroeder-the-cost-competitiveness-of-german-industry-in-times-of-considerable-uncertainty.html
- Deutschland.de – “Germany’s industry: the most important facts and figures” – https://www.deutschland.de/en/topic/business/germanys-industry-the-most-important-facts-and-figures Deutschland
Eric Allgood is the Managing Director of SBAAS and brings over two decades of experience in corporate guidance, with a focus on governance and risk, crisis management, industrial relations, and sustainability.
He founded SBAAS in 2019 to extend his corporate strategies to small businesses, quickly becoming a vital support. His background in IR, governance and risk management, combined with his crisis management skills, has enabled businesses to navigate challenges effectively.
Eric’s commitment to sustainability shapes his approach to fostering inclusive and ethical practices within organisations. His strategic acumen and dedication to sustainable growth have positioned SBAAS as a leader in supporting small businesses through integrity and resilience.
Qualifications:
- Master of Business Law
- MBA (USA)
- Graduate Certificate of Business Administration
- Graduate Certificate of Training and Development
- Diploma of Psychology (University of Warwickshire)
- Bachelor of Applied Management
Memberships:
- Small Business Association of Australia –
International Think Tank Member and Sponsor - Australian Institute of Company Directors – MAICD
- Institute of Community Directors Australia – ICDA
- Australian Human Resource Institute – CAHRI
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Further reading
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