Barrier To Business Growth On Both Sides Of Tasman

3 October 2003

Press release

Compliance A Serious Barrier To Business Growth On Both Sides Of The Tasman

Businesses on both sides of the Tasman are struggling under the weight of unwieldy red tape and compliance costs, according to recent findings from surveys in Auckland and New South Wales. Most strikingly, small businesses in both countries are the hardest hit.

In some areas of compliance, New South Wales businesses face even higher costs than their New Zealand counterparts.

These findings are among the results of two recent surveys – one of Auckland Chamber of Commerce members and the other of State Chamber of Commerce (NSW) members.

One of the most alarming findings was that, in both countries, small businesses are required to handle a similar amount of paperwork as much larger businesses, which imposes huge demands on staff and business resources.

Michael Barnett, Chief Executive of the Auckland Chamber of Commerce, and Margy Osmond, Chief Executive Officer of the State Chamber of Commerce (NSW), say the heavy demands compliance work places on small business owners takes them away from their core work of leading and growing their businesses and, as a result, can have a negative impact on areas such as sales and profitability.

The Auckland survey reveals that companies with staff of five or fewer spend 172 hours annually – the equivalent of about a month’s work - on Government-related red tape and compliance issues while larger businesses spend comparatively fewer hours per staff member.

“Clearly some compliance costs are necessary, but when a business spends the equivalent of a full-time month each year on compliance work, they face a huge barrier to business growth – especially if they are a small business,” says Mr Barnett.

A similar theme emerged in Australia. For example, in the New South Wales survey the owners of businesses with five or fewer staff do most of the compliance paperwork themselves.

Ms Osmond says the burden on small businesses is disproportionate to the size of the business. She says that in many cases industrial relations paperwork takes longer per employee for a small business to deal with than a medium business, and that tax paperwork takes almost as long for a small business as a medium business.

The surveys found that GST places significantly more demand on New South Wales businesses than its New Zealand counterparts. In New Zealand, the average business takes between 15 and 30 hours a year to complete GST returns while Australian businesses take from 20 to 60 hours a year.

Auckland companies also face lower compliance costs than those in New South Wales for obtaining licences, managing superannuation schemes and handling payroll tax.

Only 40 percent of New Zealand firms need a licence to operate compared with 60 percent in Australia. All Australian businesses have payroll tax liabilities, but there is no such equivalent tax in New Zealand. As well, superannuation is compulsory in Australia so all businesses are required to administer this, whereas only 17 percent of the New Zealand respondents had superannuation schemes. In New South Wales, superannuation, along with occupational health & safety work, was the most time consuming regulation for business.

Other main findings are:

- Accident Compensation – 73 percent of New Zealand businesses handle premium renewals in less than two hours compared with 60 percent of Australian businesses.

- Occupational health and safety – in the New South Wales survey, findings showed that occupational health and safety compliance work was, along with superannuation, the most time consuming regulation for business. Findings in Auckland indicate that 47 per cent of businesses worked on an OSH related compliance matter within two weeks of the survey. The comparative figure for New South Wales is 56 percent.

- Unfair Dismissal – in both Australia and New Zealand most businesses spend from five to 15 hours on this issue. In both surveys, 5% of the respondents had to spent more than 50 hours in this area. In New South Wales, the majority of respondents handling an unfair dismissal case in 2002/2003 spent between 5 to 15 hours. The finding for Auckland was similar.

Mr Barnett says: “Government must work with business to lessen the overwhelming burden of red tape that businesses are finding crippling.”

ENDS

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