Why corporate compliance is becoming a $160bn nightmare for small business

Yet more and more small and family businesses tell me they're spending more time on "the business of running the business" than ever before - time that should be spent delighting customers and creating value.

Few small business owners would be surprised by recent Australian Institute of Company Directors research showing the cost of complying with Commonwealth regulations has grown to $160 billion, almost 6 per cent of GDP, up from $65 billion (4.2 per cent of GDP) in 2013. Add state/territory and local government requirements, and it's little wonder the Australian Chamber of Commerce and Industry's 2025 Business Conditions Report revealed 42 per cent of small businesses say compliance has a negative impact on operations.

The Business Council of Australia's Regulation Rumble report found South Australia the easiest jurisdiction to do business under its scorecard - yet even there, opening something as simple as a café still requires dozens of permits and approvals.

But it's not just government where rule-making has gone rogue. Small businesses are increasingly entangled in a quieter, rapidly growing "white tape". These are the administrative and compliance burdens imposed by large businesses on small and family businesses - obligations that go beyond what is legally required of a small business. It's the extra rules some other business decides you must meet before they'll work with you.

Think bespoke reporting templates, mandatory software systems, complex questionnaires or contract clauses referencing Acts that were never intended to apply to a small operator. These obligations are often justified as a large business' effort to meet their own requirements - on modern slavery, climate disclosures, cyber security or corporate governance. But instead of managing the responsibilities themselves, they cascade them down the supply chain.

Too often, there is little guidance, standardisation or regard for the cost, time or expertise required of a small business. It's a story we're hearing across Australia.

Modern slavery clauses are now common in supply contracts - but small businesses tell us they're given dense references to the Modern Slavery Act 2018 with no explanation of what they mean or how to comply. Large companies above the threshold must lodge Modern Slavery Statements. Small suppliers are not required by law to do the same. Yet many are asked to sign contractual obligations that feel like they carry hidden liability, and there's a complete lack of clarity, tools or training. That's white tape.

Australia is moving toward mandatory climate-related financial disclosures. Already, larger firms - often customers - are asking small suppliers for detailed Scope 1-3 emissions data. But small businesses don't or can't readily collect that data, can't easily calculate it and in many cases don't have access to the necessary information because it lies with upstream suppliers. Still, the requests keep coming - often via bespoke spreadsheets or paid third-party platforms of uncertain trustworthiness. We've argued for comprehensive decision-support tools that guide small business.

Even in banking, prudential risk assessments and climate-related reporting increasingly expect small business customers to provide data that is not accessible, standardised or proportionate. This white tape shifts reporting expectations not because they are reasonable, but because they are convenient for larger firms.

Across sectors, small businesses say they are repeatedly asked for the same information in different formats - ABNs, insurance certificates, safety documentation, gender equity data, cyber attestations, environmental declarations. Some buyers insist on proprietary portals. Others require PDFs uploaded in oddly specific ways. Some mandate training that duplicates WorkSafe, industry or government requirements.

These inconsistent, duplicated "make-work" tasks add no value, yet drain precious hours each month. No wonder industry groups are calling for common templates, aligned requirements and "tell-us-once" models - and for clarity about what is reasonable to ask of small suppliers.

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In procurement we've seen small suppliers given contracts containing obligations across modern slavery, cyber security, whistleblower protections, ESG reporting, diversity and inclusion - all referenced simply by citing the relevant Acts, with no practical guidance. Complex procurement participation requirements can lead to small business suppliers opting out and see customers not truly benefit from the positive value, agility, competitiveness and innovation force that small suppliers can provide.

Compliance becomes a scavenger hunt through legal frameworks never designed for small enterprise. Again: white tape.

White tape and regulatory over-reach act as a productivity tax. Regulatory complexity undermines innovation and investment, and the Productivity Commission has repeatedly warned that regulatory creep and administrative overload suppress business dynamism. The Australian Chamber of Commerce and Industry found 39 per cent of small businesses spend more than six hours each week navigating red tape. That's time not spent with customers, staff, or growth opportunities. That is literal deadweight loss and our economy feels it.

This is why the the Australian Small Business and Family Enterprise Ombudsman continues to push for better regulatory discipline, including:

Australia is not alone in this challenge. International models show what works.

The UK's Primary Authority model enables small businesses to get consistent, assured regulatory guidance, reducing conflicting requirements across jurisdictions.

The EU's SME Test requires regulators to identify disproportionate impacts on small business and adjust policies accordingly.

Canada's Small Business Lens obliges regulators to quantify SME compliance costs before introducing new rules.

These models share one principle: think small first. It's time Australia did the same.

To tackle the compliance quagmire, we need real-world examples, straight from traders experiencing them. This will directly shape recommendations to government on right-sizing regulation, improving standardisation and reducing burden-shifting onto the smallest businesses in the economy.

Small businesses are the engine room of our economy, yet too often carry compliance loads intended for larger firms. If we're serious about productivity, innovation, and fairness, we must cut red tape where it's excessive - and confront white tape where it's unnecessary, unhelpful and unfair.