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COSBOA's submission to the Inquiry into the effect of restrictions and prohibitions on business

Red Tape – the problem.

Good regulation is a must. It protects us all, makes us safe and makes the world fair and transparent. Unnecessary or inefficient red tape is a curse and a drag on the economy and impacts on people’s health. We need good regulations and good regulators.

In Australia, it is in the main a good place to do business and our regulators are considered some of the best in the world. Not perfect but good. There are and always will be demands on business that need to be made. These demands need to be minimised and they need to change with the times. Demands that are obsolete and unnecessary need to be removed.

When dealing with small business people the issue of compliance is 80% process and communications. The policy can be brilliant but if it is communicated poorly or the process is complex the policy will fail.

The introduction or maintenance of unnecessary compliance or unnecessary process is something that comes from all sides of politics. It is also about some powerful industry associations and unions who aggressively want less red tape but slink away into a corner when they realise they actually make money from the complexity that small business people and workers face.

All governments since at least the mid 1980s have claimed that red tape and compliance is an impediment on business that should be removed and that no new red tape should be introduced. They have all argued this point. All ministers, Prime Ministers, Treasurers, Finance Ministers and their parliamentary supporters have argued that they would remove red tape and make business easier. There have been at least 8 red tape busting task forces formed and reformed. For example, the Banks Taskforce report Rethinking Regulation: Report of the Taskforce on Reducing Regulatory Burdens on Business which was released by Peter Costello under a great deal of expectation in 2006. There have also been any number of committees working within government departments and between government departments. There has also been the same number of committees, task forces and forums at the state and territory levels.

The outcomes of these committees and task forces have been extraordinary to say the least. Things did not necessarily get better as a result of all this work, meetings and reports. The new red tape and compliance demands placed on small business over the last 25 years has been overwhelming. What compliance did we NOT have 20 years ago? What compliance and time demands are now placed on small business owners that weren’t there 20 years ago? What are the main time demands that have been placed on the people and families who earn a living through their own enterprise?

In 1998 the GST was introduced and a whole regime of red tape developed around Business Activity Statements. It was not easy, it has become easier, but it is still a burden on small business people. GST is complicated, pharmacists have different rules around GST than other retailers, some food has GST imposed some doesn’t, you can lodge monthly or quarterly, on line or on paper, DIY or at some expense using an accountant or bookkeepers. One of the reasons that the GST was introduced was to stop the black economy, and that has not gone away. The GST was also supposed to get rid of payroll tax but that never went anywhere.

In 1993 universal superannuation was introduced and instead of just including this in the tax system, for some reason employers were asked to work it all out and send the money off to a super fund. Then another government decided that was too easy and they invented super choice so that employers then had to send payments off to a myriad of funds. Now we have a super clearing house which is just some process replacing another unnecessary process. Employers find themselves acting in some capacity as financial advisers. This is unnecessary red tape that can be cut away and included in the tax system to everyone’s benefit. Not one of those red tape busting task forces thought of that idea. Plus, unions and some industry associations make money from this system so they resist change.

During the 1990s Occupational Health and Safety became a bigger issue, and so it should, yet concentrating on a real issue of workplace safety has become harder with all the other red tape demands placed on businesses. When is the owner of a small business supposed to find the time to do all these activities?

All through the 1990s and up to 2018 the changes to industrial relations and workplace relations have been constant. Awards and agreements have changed, Work Choices came and went and we now have the Fair Work System with the FWA and the FWO. This system is under constant change and now the unions aren’t happy with the system they designed and they want a new system where they are in total control. Everything to do with employing someone has all been regularly changed, updated, removed, added in, modified, revamped, refocused and modernised. Every change has created a red tape nightmare for small business people and confusion for their employees. Plus, unions and some industry associations make money from this system so they resist change.

Then we had paid parental leave which has created completely unnecessary red tape for a small business owner. We had a choice to either pay the eligible parent directly from Centrelink or make it more complicated by including the employer in the process. Naturally the government of the day chose the complicated inefficient process. The process is complicated as shown by the “Employer Toolkit” provided by the Department of Human Services.

It is 48 pages long and is confusing and challenging at best. We recommend the Committee members review the toolkit to see what small business people are expected to understand. The “toolkit” contains four pages of CVL, XML and HTML codes that a business person might want to use in their payroll system. This shows a complete lack of understanding of the small business community, or of business life in general.

Now we may have paid Domestic Violence Leave to manage. The curse of DV is now being placed into workplace relations just to add to the woe of the people involved but to also create new victims, the self-employed. Currently people manage these awful situations as best they can, as far as we can see no one wants it to have any extra effect on the workplace. It would be best managed by the experts in the welfare sector but ideologues with no understanding of community or of workplaces want to make a small business person pay for someone else’s difficulty. There are better ways of managing this but as always the better way will be ignored for the sake of ideology, power and politics.

There have been some very good initiatives. For example, the ‘Red Tape Repeal’ day did have results but the constant changes in ministers and the resistance of those who benefit from complexity has caused stagnation. We also have in place a ‘Regulator Performance Framework’ which was embraced enthusiastically by some but not all. That must be revisited and become part of an annual “Report on Regulator Performance” day.

Some of the best outcomes for small business has come through an understanding of who we are and how we operate. For example, the changes in process and rules for determining Unfair Contract Terms shows that the red tape imposed on us from unscrupulous, or uncaring, big businesses actually impede good business. The changes have provided small businesses with better fairness and less ‘surprises’. More changes are needed in that policy area.

One problem area is late payment to small business by big business. The Business Council of Australia and COSBOA are working together to confront this problem and many large Australian businesses have signed up to the Payment Code, but the biggest multi-nationals have no care or motivation to pay in a timely manner. A small or medium business that has no funds will struggle to pay tax and other regulatory demands.

The ASBFEO has also completed an inquiry into late payments and it appears that we may need to legislate on payment times. This has occurred in the European Union and may be needed here. Compliance developed to help small business better comply sounds like an oxymoron but may be the only way to assist small businesses comply with payment demands.


The development of digital business support has also provided an opportunity to streamline payment and communications to the benefit of the business community and for government agencies. This has to be managed carefully.

One good example of a digital response is Single Touch Payroll (STP). This is designed to collect information from a business while it actually completes a business task, rather than undertake a separate function such as the Business Activity Statement. There is some way to go before this embraces all businesses as there are some seventy thousand businesses who still do pay on spreadsheets and do not use software. But we will reach a stage when all businesses will be plugged in rather than some being unplugged.

There is also the development of eInvoicing processes that allows for faster and more secure communications that will eventually give governments and business then opportunity to communicate key information in the least intrusive manner.

We need to make sure that the use of technology is not abused by government agencies to actually create more work.

Shadow Regulators

There is an emerging concern around a group we call our shadow regulators. These organisations are not for profits that have either legislative control or monopolistic control over the business community. This is based around bar code management, accessing music and managing goods packaging. They are:

- GS1 – a world wide organisation that manages bar codes on behalf of the business world.

- APRA AMCOS - who manage the payment of royalties from all businesses who play music to song writers and authors. “We're here for the music. We help music creators get paid for their work and give music users easy ways to legally play and copy what they like. Royalties keep the music coming and ensure the industry’s future. And that’s what we all want to hear.”

- The Phonographic Performance Company of Australia Limited (PPCA) who seek royalties and payments from all businesses who play music developed by a production companies.

- The Australian Packaging Covenant Organisation (APCO) is a co-regulatory, not-for-profit organisation that partners with government and industry to reduce the harmful impact of packaging on the Australian environment.

- Superannuation funds are in many ways a shadow regulator as we have needed to fit in with their needs and processes and they have shown, in most cases, no regard for the time or health of the small business person. We are treated as an unpaid supplier that will be fined if we don’t do their work, for no financial return.

These organisations do not report to government committees yet act exactly like a regulator. They can charge businesses what they wish, they can take businesses to court. They like any NFP must do an annual report but basically they report only to themselves.

The GS1 group charge some of the highest fees for membership and purchase of barcodes and GNITs of any of the country based GS1s. It is quite difficult to compare their prices but it appears likely they, having a monopoly, have created extra costs and process for Australian businesses to maintain jobs for 150 staff in luxurious premises. They need to be more transparent and more responsive to business needs not their own corporate needs.

Regulation and activity that can be removed include the role of pay clerk for paid parental leave and the collection and distribution of employees’ superannuation.

For many years COSBOA has been calling for superannuation to be included in PAYG payments to the tax office. This would save the business and superannuation community billions of dollars and give better certainty to employees. Our proposal to remove business from the collection process would mean that the superannuation industry would collect people’s funds from one place, the ATO, instead of 800,000 places- employers. The savings would be huge and there would be an increased return for fund members, but the idea is rejected due to a fear that Directors and/or their organisations may not get as much money through Directors fees.

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