Election 2025: Red tape reduction proposals from major parties
The Coalition’s proposals focus on immediate deregulation for small business, while Labor is planning longer term, systemic reforms. Here’s how the major parties have promised to reduce the administrative burden on small business:
Small businesses contribute $483 billion to the economy, equating to 33 per cent of Australia’s GDP and employ more than five million people or 42 per cent of the private workforce. Yet they face mounting compliance obligations, a complex tax system and challenging operation conditions amid global uncertainty.
Over the past three months, conditions for small businesses deteriorated by 0.3 per cent, according to ASBFEO. However, the overall operating environment has stabilised, following the COVID-19 induced declines, with the recent reduction in interest rates and early signs that households are spending more offering green shoots.
So, what should small businesses be hoping for from the next Federal Government?
The IPA is advocating for policies that boost productivity by cutting red tape, supporting expansion ambitions and establishing a dedicated small business agency. More incentives for innovation and sustainability initiatives and bold tax reform would also drive the sector’s growth.
Curbing excessive red tape
Excessive red tape places pressure on small business in Australia. The current cumbersome approach to regulation should be replaced with a simplified, small-first, risk-based regulatory framework that mirrors the EU, the IPA says. This would ensure regulatory burden was commensurate with the size of a business to free up business owners to spend more time on operations and less on administration.
Michael Davison, General Manager Advocacy and Emerging Policy, says complex and excessive regulations are stifling growth, hindering innovation, and making it increasingly difficult for small businesses to remain competitive.
“Nearly half of our small businesses are operating at a loss, and the majority of self-employed business owners earn less than the average full-time wage,” he said.
“This is unsustainable. There is a focus on cost-of-living relief for households, but self-employed business owners continue to go backwards. Supporting small business is crucial to revitalise Australia’s productivity and grow our economy.”
Davison warns without meaningful reform, compliance costs will keep rising, limiting their ability to invest in growth, create jobs, and contribute to economic prosperity.
Regulatory compliance chews up valuable time and resources that could be better spent on expansion and productivity. “Designing a regulatory framework with small business at the forefront is a real opportunity to restore small business productivity,” he says. “A regulatory framework that is both effective and supportive of SME growth is essential.”
A ‘small-first’ risk-based approach would not subject low risk businesses to disproportionate scrutiny, freeing up time for operational matters rather than bureaucratic hurdles.
“Aligning Australian regulations with global best practices, particularly OECD standards, would improve efficiency and international competitiveness,” Davison says. “Moreover, establishing a system of periodic reviews would ensure that regulatory agencies remain accountable for the regulatory burden they impose on businesses.”
Strengthen small business voice
Meanwhile, the ASBFEO is pushing for greater consideration of small businesses when new laws are made, as outlined in its 14 steps to energise enterprise. “Every Cabinet submission, preliminary, and formal regulatory impact statement and new policy proposal [should] include a small business impact statement,” ASBFEO Bruce Billson says.
Governments can support the sector by promoting more access to affordable finance, facilitating education for owners and managers and increasing opportunities in international markets.
Currently, small business must navigate a mire of agencies that deliver a range of services, which can be complex, confusing and inefficient. A body dedicated to small business, like the US Small Business Administration Agency, could be a one-stop-shop for multiple services, including:
- Access to capital through loans, grants, and investment programs;
- Mentoring and support for business development;
- Guidance on regulations to ease compliance burdens;
- Support of technology and innovation to enhance competitiveness;
- Opportunities to expand into new markets; and
- Disaster recovery assistance.
Supporting innovation
Innovation is essential for productivity – yet private sector spending on research and development (R&D) has been at or below OECD averages for the past 20 years. Australia needs a progressive innovation policy for small business that funds technology adoption, strengthen links between industry and academia, develops government procurement initiatives and funds research into youth entrepreneurship.
On government procurement, the ASBFEO agrees that small businesses should have more opportunities to work with Government. “Give small business a greater chance to compete for government contracts by decoding the rules and practices that favour the ‘in-crowd’ of familiar, established and larger suppliers,” Billson says.
Encouraging sustainability
Small business can play a key role in an economy’s economic and environmental sustainability, leading the way to a circular economy with the help of Government.
The IPA believes small business incentives that promote sustainability will help drive strong growth. This could cover designing products that are 100 per cent reusable, mandating recycling and waste reduction, developing educational programs that engage communities and encouraging collaborations between businesses, government, and researchers.
“Designing a regulatory framework with small business at the forefront is a real opportunity to restore small business productivity.”
Michael Davison, General Manager Advocacy and Emerging Policy, IPA
Bold tax reform
For too long, tax reform in Australia has tinkered around the edges. Problem areas have been left to languish, including taxing trusts and Division 7A, which deals with loans made by companies to shareholders. The system is overly reliant on personal income tax and GST disproportionately benefits higher income earners.
The IPA is calling for a taxation overhaul to create a system that’s:
- Fair, so that taxation rates are commensurate with the taxpayer’s ability to pay, and taxpayers in similar positions pay the same amount;
- Efficient, so that it does not distort economic decisions; and
- Simple, so that everyone can understand the system and the administrative burden is low.
In addition, the ASBFEO has suggested that a tax discount or offset scheme could be a smart way to help new small businesses. This would allow owners to keep extra income, which they could invest in the business in the critical early years.
Given the great contribution that small businesses make to the Australian economy, there’s no time to waste.
“Small businesses can’t wait for years and years for supportive action at this time of significant economic and cost of doing business challenges,” says Billson. “We need to redouble our efforts to nurture and develop the small and family business economy and turn around some worrying trajectories.”
More information on IPA’s pre-election policy submission here.
