Red tape ‘fast becoming the most expensive employee on the payroll’, advocates say

Ahead of the 2027 state election in NSW, there are numerous factors impacting business confidence, including exorbitant red tape costs that are greater than the state’s median salary, according to Business NSW.

The latest findings from the Business Conditions Survey revealed that regulatory and compliance requirements are costing almost one in three businesses approximately $100,000, and more than half are passing these costs onto consumers.

In addition, four in 10 businesses rate current levels of regulation as excessive, and average burden scores sit at 6.8 out of 10.

Not only is red tape “fast becoming the most expensive employee on the payroll”, but it is also “a serious drag on productivity”, according to Business NSW CEO Daniel Hunter. Unsurprisingly, considering one in three businesses claimed constrained operation and growth ability due to reportedly excessive regulation.

He said: “Business owners are telling us they’re spending more time filling out forms than serving customers.”

The survey also revealed the time cost of compliance, with one in three businesses spending over 21 hours a month, a 7 per cent jump from March last year.

Interest rates are also affecting operational confidence. February saw the lowest levels since November 2023: -42.8.

Hunter said: “Reforms to drive down the cost of doing business must happen as a matter of urgency.”

According to Business NSW, 86 per cent of its members identified the completion of ongoing reforms to the workers’ compensation system as a likely driver of upswing in business operation and conditions.

“A further 83 per cent support more action to reduce council infrastructure backlogs,” Hunter said. This may address the intensification of regional skills shortages, which, as noted in the report, are partly connected to housing constraints.

Hunter added: “Payroll tax reform is also critical, with one in three businesses saying reducing the rate would have a ‘major’ impact on their ability to run and grow their business.”

“Reducing tax burdens while also improving energy reliability, housing supply and enabling infrastructure are key priorities.”