Open any business newspaper or website, and there’s one word you’ll almost definitely find on the first page: innovation (Along with ‘disruption’, ‘agile’, and ‘cloud’ – but that’s a discussion for another day). Politicians love a good bit of innovation. Malcolm Turnbull introduced his government’s Innovation Agenda in early December. At the launch, he said that “We want to be a culture, a national culture of innovation, of risk-taking, because as we do that, we grow the whole ecosystem of innovation right across the economy.”
But despite what the pollies and commentators say, it’s not just a matter of research, education and infrastructure. There are plenty of Aussie businesses out there with the ideas, talent and drive to do great things. The problem is red tape and regulatory burden.
To sum it up, regulations designed to protect the public are broad and inflexible. They’re often confusing for start-ups and other small businesses. Regulations can stop businesses accessing funding, trialling their idea, or launching to the public.
A lot of the red tape needs to go. According to the Heritage Foundation, Australia’s regulatory efficiency is falling. For example, we’re 21st in the world for labour freedom – just behind Colombia. Of course, some basic regulation is absolutely necessary. You wouldn’t want to get rid of basic safety requirements. Especially for products and industries such as healthcare and transportation.
There’s a balance to be struck.
So how do we get it right?
The United States is a great example. Back in April 2012, the JOBS Act passed with bipartisan support. JOBS stands for ‘Jumpstart Our Business Startups’, which should give some clue as to its aims. The main parts of the Act introduced critical flexibilities, including (but not limited to):
- Increasing the number of shareholders a company can have before it has to become a publicly reporting company.
- Allowing small public offerings to be done without registration and approval from the SEC.
- Allowing non-accredited investors to get a foot in the door.
Closer to home, there’s the Hong Kong fintech scene. ‘Fintech’ is financial technology – using innovative software to provide financial services. HK has a thriving community of start-ups working on a variety of projects and products. Payment processing, cryptocurrency, investment. In Hong Kong, when it comes to your money, there really is an app for everything.
These businesses are largely free of regulation. They don’t need state licenses for important features or functionalities. For example, until November last year, you didn’t need licenses for stored value facilities
What’s next for Australia?
That depends on who you ask. Different public, industry and private groups are busy advocating for less cumbersome regulation. Their objectives include clarifying, reducing and removing the rules for SMEs.
In December 2014, NAB released a detailed deregulation plan for SMEs. Key points included:
- Reducing reporting requirements, from BAS statements to OHS reports.
- Reducing compliance costs.
- Setting specific dates for compliance activities.
- Reducing ‘regulatory creep’. This is when existing regulations are (inappropriately) stretched to cover brand new industries.
- More efficient consultation between small businesses and regulators.
Many points, including the BAS idea, were welcomed by the government. As part of the government's official Cutting Red Tape initiative, in mid-November, they announced $4.5 billion worth of red tape savings – double the target. From the start of July 2016, they’ll refocus on reforms that directly impact innovation and productivity.
Get involved in cutting the red tape
Want to get involved? You can make a submission directly at the Cutting Red Tape website. Contact COSBOA or your local chamber of commerce to find out how you can contribute. Keep an eye out for small business tax and admin changes that’ll come into force in the first half of 2016. And don’t take your eye off the National Innovation and Science Agenda.