Running a business across state borders should be straightforward. Same country, same products, same customers. But in Australia, crossing a border can mean a whole new set of rules, paperwork and costs.

A new report from the Australian Retail Council (ARC), prepared with Mandala, says this patchwork approach to regulations is acting like a hidden tax on retailers and households. The report estimates regulatory fragmentation will cost the economy about $26 billion over the next decade and add billions more to everyday household expenses.

The report calls it the ‘Fragmentation Tax’ and says it’s pushing up prices and holding businesses back.

The cost drain of doing business across borders

If you run a business in more than one state, you’ve probably run into this already. Different rules, different forms and sometimes entirely different systems just to sell the same product.

ARC CEO Chris Rodwell says retailers are paying the price in time and money.

“Retailers operating interstate are forced to run parallel compliance systems, fragmented logistics models and jurisdiction-specific supply chains,” Rodwell said.

“Businesses are spending more time and money navigating different rules when they could be investing in jobs, innovation and growth.”

According to the report, regulatory fragmentation is costing the economy about $2.6 billion a year in lost productivity and higher costs. Those costs don’t stay with the business, they end up impacting the price customers pay at the checkout.

How it affects everyday prices

The report argues that inconsistent regulations are feeding into cost-of-living pressures. Everything from delivery schedules to packaging rules can vary between states, creating extra work and extra expense for businesses trying to operate nationally.

ARC Chief Economist Glenn Fahey says even simple logistics can turn complicated fast.

“Right now, a truck carrying a legal load in Sydney can be forced to stop at the border and transfer that load onto a different vehicle simply to continue to Brisbane,” Fahey said.

“Retailers are sourcing different packaging and coffee cups for different states. Delivery schedules are dictated by mismatched local rules and different council curfews.

“This friction ultimately ends up in the price on the shelf that every Australian pays.”

The modelling estimates fragmented regulation adds around $940 million a year to household costs. That’s alot of dollars  spread across millions of households, especially during a cost-of-living crunch.

Retail’s impact on the economy

Retail sits at the centre of the economy, which means inefficiencies ripple out into other industries. With more than 1.5 million Australians working in retail, and the sector making up a large share of household spending, even small productivity gains can make a difference to business and households’ bottom line.

Mandala partner Dr Adam Triggs says improving retail productivity has knock-on benefits across the whole economy.

“The retail sector sits at the centre of Australia’s supply chains and consumer economy,” Triggs said.

“Our modelling shows that even a modest productivity improvement in retail transmits benefits across every sector – from healthcare and manufacturing through to construction and education.”

The report estimates that a one per cent boost to retail productivity could lift GDP by $3.2 billion a year and save households around $1.3 billion annually.

Compliance, compliance, compliance

Fragmentation is only part of the problem. The overall regulatory burden on Australian businesses has been rising for years, with compliance requirements becoming more complex and more costly over time.

Federal regulations alone now cost businesses an estimated $160 billion a year to comply with. Once state and territory requirements are added on top, the total compliance burden climbs to around $240 billion annually. For businesses operating across multiple states, that layered system can be particularly challenging to manage.

If your business is trying to expand into another state, that complexity can become a barrier to growth rather than just an administrative headache.

The report highlights transport and environmental regulations as major sources of duplication and unnecessary cost. Differences in heavy vehicle standards and accreditation rules can complicate freight movements across state borders, while varying delivery curfews set by local councils can make scheduling more difficult and less efficient.

Environmental rules also vary. Different container deposit schemes, single-use plastic bans and waste regulations mean businesses often need separate packaging and compliance processes depending on where their products are sold. These differences might seem minor on their own, but together they create extra work and expense.

One rule for everywhere

The ARC says the solution isn’t removing regulation altogether but making it consistent across the country. The report argues that harmonised rules would reduce duplication, lower compliance costs and make it easier for businesses to operate across state borders.

Rodwell says Australia has tackled similar challenges before.

“This has been done before and we can do it again,” he said.

“The blueprint exists. What’s required now is political commitment.”

The report recommends setting aside funding to support regulatory harmonisation, creating a national body to coordinate reforms across jurisdictions and delivering an initial package of harmonised regulations within the next 12 months.

The aim is to create a more consistent national framework that reduces unnecessary complexity while still maintaining appropriate standards.

It’s not just retail

While the report focuses on retail, the issues affect plenty of other industries too, particularly businesses that sell products, ship goods or operate across multiple states.

Regulatory fragmentation often shows up in practical ways across a business. It can mean spending extra time on administration, dealing with higher logistics costs, managing different packaging requirements or keeping up with multiple sets of compliance rules. Individually, those costs might seem manageable. Together, they can eat into already thin margins and make growth harder than it needs to be.

Australia’s state-based system isn’t going anywhere, but the report argues that inconsistent regulations don’t have to come with it…

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