Productivity Commission report says regulators need to lay off small business

Small businesses feel the consequences of regulation more than any other type of business, and changes should be made to the entire regulatory system so SMEs aren’t needlessly hindered by red tape, a Productivity Commission report has warned.

The commission has released the final version of its small business regulation report, with similar findings suggesting a wide range of changes. Small Business Minister Bruce Billson has responded to the report, saying the government will consider several of the recommended changes.

“The commission’s report suggests that there are opportunities for regulators across Australia to improve the regulatory experience for small business,” he said.

“If implemented properly, improved engagement strategies have the potential to result in a win-win situation for small businesses and regulators.”

The preliminary report was already released earlier this year, but the findings are still the same. Specifically, that small businesses are being burdened by over-regulation, and that while necessary, more localised government agencies need to tone it down.

For instance, the report recommends regulators should more accurately target businesses that are more likely to present a higher risk to the community, removing unnecessary burdens from lower-risk businesses.

This would mean fewer inspections or less onerous reporting requirements, it said.

“When done well, such targeting is likely to achieve outcome at a lower cost than an engagement approach based on strict application of a small business definition.”

Other recommendations include:

• An assurance of low-cost mediation for resolution of disputes with local governments.
• More formal cooperation between regulators to lessen the burden on small businesses for reporting.
• More reporting on behalf of the regulators to ensure they’re being as effective as possible.
• Giving regulators more resources to ensure risks don’t go unmitigated, but also a list of priorities to ensure those same regulators are targeting the right businesses.

Given over 95% of Australia’s businesses are “small”, the report argues, regulatory impacts can be greater for these companies than others.

“For some small businesses, compliance necessitates the diversion of a substantial proportion of productive business time and modifications to their production or service delivery processes in ways that are uncertain to deliver improvements in regulatory outcomes.”

Presiding commissioner Warren Mundy said in the report that by exercising discretion and “choosing judiciously how regulation should be implemented”, they can reduce costs for businesses – “a win-win for business and the community”.