The $160bn Compliance Crisis Facing Australian Small Business
If you own or operate a small business in Australia, you likely began your entrepreneurial journey with a vision of passion, skill, and contribution to the nation's economic prosperity. You certainly did not dream of endless forms, compliance portals, or uploading identical information across multiple systems.
Yet, an increasing number of small and family-run enterprises report spending more time on "the business of running the business" than ever before. This administrative overload steals precious hours that should be dedicated to delighting customers and creating genuine value.
The Staggering Financial Impact of Regulatory Compliance
Recent research from the Australian Institute of Company Directors reveals a shocking reality. The cost of complying with Commonwealth regulations has ballooned to $160 billion annually, representing nearly 6 percent of GDP. This marks a dramatic increase from $65 billion, or 4.2 percent of GDP, back in 2013.
When state, territory, and local government requirements are added to the mix, the burden becomes overwhelming. It is little wonder that the Australian Chamber of Commerce and Industry's 2025 Business Conditions Report found 42 percent of small businesses say compliance negatively impacts their operations.
Even in South Australia, identified by the Business Council of Australia's Regulation Rumble report as the easiest jurisdiction for business, opening a simple café still requires dozens of permits and approvals.
The Rise of Corporate "White Tape"
Beyond government red tape, small businesses are increasingly entangled in a quieter, rapidly growing phenomenon known as "white tape." This refers to the administrative and compliance burdens imposed by large corporations on their smaller suppliers—obligations that exceed legal requirements.
These burdens often include:
- Bespoke reporting templates and mandatory software systems
- Complex questionnaires referencing Acts not designed for small operators
- Contract clauses cascading large firms' responsibilities down the supply chain
Common justifications for white tape include meeting requirements on modern slavery, climate disclosures, cybersecurity, or corporate governance. However, small businesses frequently receive little guidance, standardisation, or consideration for the cost and expertise required.
Real-World Examples of White Tape in Action
Modern slavery clauses are now commonplace in supply contracts. Yet, small businesses report being given dense references to the Modern Slavery Act 2018 without explanation of how to comply. While large companies must lodge Modern Slavery Statements, small suppliers are not legally required to do so. Many still face contractual obligations that imply hidden liability, lacking clarity or support.
As Australia moves toward mandatory climate-related financial disclosures, larger firms are asking small suppliers for detailed Scope 1-3 emissions data. Most small businesses cannot readily collect or calculate this information, as it often lies with upstream suppliers. Requests continue via bespoke spreadsheets or paid third-party platforms of uncertain trustworthiness.
In banking, prudential risk assessments and climate-related reporting increasingly expect small business customers to provide data that is inaccessible, unstandardised, or disproportionate. This white tape shifts reporting expectations not because they are reasonable, but because they are convenient for larger entities.
The Productivity Drain of Duplicated Tasks
Across various sectors, small businesses report repeatedly providing the same information in different formats:
- ABNs and insurance certificates
- Safety documentation and gender equity data
- Cyber attestations and environmental declarations
Some buyers insist on proprietary portals, while others require PDFs uploaded in oddly specific ways. Mandatory training often duplicates WorkSafe, industry, or government requirements. These inconsistent, duplicated tasks add no value yet drain precious hours each month.
The Australian Chamber of Commerce and Industry found 39 percent of small businesses spend over six hours weekly navigating red tape. This is time not spent with customers, staff, or growth opportunities—a literal deadweight loss for the economy.
International Models and Calls for Reform
The Australian Small Business and Family Enterprise Ombudsman advocates for better regulatory discipline, including:
- Genuine consultation with small business on new rules
- Small Business Impact Statements in Cabinet submissions
- Stronger regulator performance assessments
- A commitment to right-sized regulatory design
Australia is not alone in this challenge. International models demonstrate effective approaches:
- The UK's Primary Authority model provides consistent regulatory guidance, reducing conflicting requirements.
- The EU's SME Test requires regulators to identify disproportionate impacts on small business and adjust policies.
- Canada's Small Business Lens obliges regulators to quantify SME compliance costs before introducing new rules.
These models share a core principle: think small first. It is time Australia embraced this mindset.
Moving Forward: Cutting Tape and Boosting Productivity
To tackle the compliance quagmire, real-world examples from affected traders are essential. These will shape recommendations to government on right-sizing regulation, improving standardisation, and reducing burden-shifting onto the smallest businesses.
Small businesses are the engine room of the Australian economy, yet too often carry compliance loads intended for larger firms. If we are serious about productivity, innovation, and fairness, we must cut red tape where it is excessive—and confront white tape where it is unnecessary, unhelpful, and unfair.
