As AI continues to embed itself in everyday business operations, Australia finds itself facing a defining moment for data privacy. “We used to see privacy as a legal issue,” one SMB owner told me recently. “Now it’s part of how our customers perceive our brand.”
With Privacy Act reforms underway, small and medium businesses (SMBs) can no longer afford to treat compliance as a box-ticking exercise. Instead, SMBs need to move towards privacy-by-design as a strategic decision that protects customers and builds trust – positioning businesses to succeed in an AI-driven landscape.
Public perception often paints AI as a threat to privacy, but a recent Zoho survey of Australian business professionals tells a different story. Almost two thirds (65%) of leaders report that AI has actually enhanced their privacy measures. As a response to AI-driven threats, companies are embedding safeguards and implementing policies, demonstrating that responsible AI adoption and strong privacy practices can be complementary, not conflicting. However, gaps still remain around data quality, visibility, and transparency.
For SMBs, the next 12–18 months will be crucial. Those that adopt a privacy-by-design approach will gain a competitive advantage, while those that delay risk falling behind, facing both regulatory penalties and reputational damage.
What’s changing for SMBs
Australia is stepping up its privacy protections. The Privacy and Other Legislation Amendment Act 2024 introduced several changes, including a new statutory tort for serious invasions of privacy (effective June 2025) giving individuals a direct legal avenue to seek redress for serious privacy breaches. Additionally, new transparency requirements around automated decision-making will come into force in December 2026.
The reforms also enhance the powers of the Office of the Australian Information Commissioner (OAIC), and require businesses to take “technical and organisational measures” to safeguard personal information. What does this mean for SMBs? Privacy is now being looked at from a regulatory standpoint. Mistakes or omissions could expose businesses to legal risk and undermine public trust, resulting in major operational costs.
Why privacy-by-design matters
“Privacy-by-design” is about embedding privacy principles into the core of your business operations. This ensures that every process and decision takes personal data protection into account from the start.
Australian organisations are already moving in this direction. Nearly half (48%) have documented privacy policies, 46% conduct regular audits, and 85% have appointed dedicated privacy officers. Yet, fewer than half (44%) of organisations feel confident that they can explain how AI uses data to their customers.
This is where the value of proactive privacy comes into play. Businesses that adopt privacy-by-design practices reduce their legal and operational risks and strengthen customer confidence, turning compliance into a source of competitive advantage instead of a burden.
For SMBs looking to build privacy-by-design into their operations, here are three key pillars that can help guide their strategy: data visibility, access control and security and AI governance.
Data visibility
For many SMBs, it’s a struggle to identify what data they’re currently holding and how it flows through their business systems. This data sprawl is a major barrier to both privacy compliance and AI effectiveness. According to our survey, 42% of businesses cited poor data quality as a top barrier to AI adoption.
A clear audit of your data can help address this issue. Understand what personal information you collect and how long they stay in your systems. This is where unified business platforms can help. Centralising data in these systems helps to improve transparency and simplifies regulatory compliance. The goal is to make data management a continuous, automated part of operations, and not a once-a-year chore.
Access control and security
The introduction of the privacy tort shows the growing seriousness of mishandling individual data, potentially resulting in legal consequences. Having a clear overview of your data is one thing, but making sure it is secure is another. SMBs must look to implement strong access controls and maintain secure storage protocols, considering 35% of organisations still identify privacy and security concerns as major barriers to AI adoption.
Software that helps automate these processes, from role-based access to encryption and audit trails, reduces human error and provides a defensive privacy posture. When choosing software, start by reviewing their security framework first. By embedding access control and security measures at the organisational level, SMBs can manage compliance quietly in the background, freeing their teams to focus on growth.
AI governance and ethical use
By December 2026, companies will be required to disclose automated decision-making processes in privacy policies. This means that SMBs should start mapping how AI is best used in their operations, implementing human oversight and ensuring transparency in data handling.
However, only 44% of organisations are confident explaining their AI data use to customers, highlighting a real gap that proactive businesses can turn into a trust-building opportunity. That doesn’t mean that SMBs need a large compliance department. Rather, they need smart digital systems that take care of privacy governance behind the scenes and allow them to use AI confidently and responsibly.
Opt for providers known for data anonymisation, which adds an extra layer of security. Some technology providers are taking proactive steps to ensure AI systems are both powerful and private.
The next 12-18 months will be critical as privacy reforms start taking shape and enforcement tightens. For small businesses, this period represents both a challenge and an opportunity. Those that take a proactive, privacy-by-design approach now will not only stay ahead of regulation but also earn customer trust and build operational resilience.
Rather than tackling compliance manually, investing in digital tools that manage governance and data security can simplify the process, allowing business owners to focus on growth, not paperwork. AI and privacy don’t have to be at odds; when managed responsibly, they strengthen each other.
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