The NSW Small Business Commission’s latest report, Rightsizing Regulation: Review of Small Business Experiences with Regulatory Policymaking Processes, shines a light on the growing frustration among small businesses trying to navigate complex rules and compliance. The report identifies practical ways to ease this burden and ensure new regulations are designed with small business in mind.

Drowning in red tape

According to the report, small businesses feel increasingly bogged down by endless rules, with more than half of the 1,000 businesses surveyed saying compliance has only got harder over the past year. In contrast, just 2 per cent said things had become easier. Many business owners said it’s not just the number of regulations but the lack of clarity and support that adds to their frustration.

NSW Small Business Commissioner Chris Lamont explained, “One of the most frequent complaints I hear is the impact of red tape. More than half of the small businesses responding to this review told us that regulation has become harder to navigate, while only 2 per cent said it had gotten easier.”

The report found that only 7 per cent of small businesses felt regulations were tailored to their needs, and a mere 13 per cent believed the benefits outweighed the costs.

Listening to small business voices

One of the standout findings was how disconnected small business owners feel from the policymaking process. Just 10 per cent of businesses took part in government consultations, and only 15 per cent felt their feedback was valued and used to shape policy decisions. Lamont voiced concern over this disconnect, adding that new regulations often bring costs businesses can’t afford, especially in the current economic climate.

The report offers a key solution to this problem: introducing a Small Business Impact Statement (SBIS) as part of the policymaking process. This would ensure that potential costs and benefits for small businesses are carefully considered before new regulations are introduced.

“Embedding Small Business Impact Statements into policy design would assist both regulators tasked with compliance as well as small business as it would better quantify the potential costs and benefits of proposed regulation,” said Lamont.

Recommendations to lighten the load

The report makes nine recommendations aimed at improving policy design for small businesses, including:

• Small Business Impact Statement (SBIS): Making sure small business needs are considered from the start of policy development.
• Exemptions or tiered regulations: Applying lighter rules where appropriate to reduce unnecessary costs.
• Two-stage consultation: Engaging with small businesses early in the process and again when reviewing policy options.
• Independent oversight: Creating a commissioner role to monitor adherence to good regulatory practices.
• Transparent reviews: Publishing regulatory impact assessments online and reviewing regulations regularly to keep them relevant.

The Commission’s findings reflect frustrations felt across the small business sector, with many operators saying the current approach to regulation is unsustainable. Lamont’s recommendations aim to create a system where small businesses feel heard, and regulations are practical and manageable.

Read the full report and a summary of the recommendations here.

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