While Victoria ranks last for business friendliness, South Australia tops the nation for the third year running. What smart SMEs need to know about location strategy.
What’s happening: The Business Council of Australia’s Regulation Rumble 2025 reveals stark differences between states, with regulatory costs varying dramatically depending on where you operate.
Why this matters: More than 49 per cent of businesses say government regulation significantly affects their operations, yet most SME owners don’t realise how much their state’s regulatory environment impacts their bottom line.
Australian small business owners are drowning in paperwork, and the weight is getting heavier. Between payroll taxes, planning permits, licensing requirements, and insurance duties, the administrative burden on SMEs has reached crisis levels.
The latest research paints a sobering picture. Government regulation, red tape, was noted by more than 49 per cent of respondents as something that is significantly affecting their business, according to the Australian Chamber of Commerce and Industry Small Business Conditions Survey 2024.
Even more concerning, 34 per cent of SME owners had been recently diagnosed with a mental health condition, up from 22 per cent in 2022. The connection isn’t coincidental.
“It’s hardly a coincidence that small business owners are experiencing increasing mental health issues at the same time that the government is imposing regulatory burdens,” Andrew McKellar, chief executive at the Australian Chamber of Commerce and Industry, said in recent statements. “The current compliance burdens are not fair on small businesses and it needs to stop.”
The problem extends beyond traditional red tape. Regulation often disproportionately burdens small and family businesses, as it tends to be designed with the big corporates in mind and then applied as one size fits all. There’s also growing “white tape”, regulatory and compliance requirements imposed by larger business customers, and “green tape”, with sustainability reporting cascading down supply chains.
Location matters more than you think
Most SME owners don’t realise how dramatically their business costs and compliance burden vary depending on which state they operate in. The Business Council of Australia’s Regulation Rumble 2025 report, which compares regulations and tax policies across states and territories, reveals stark differences.
South Australia has topped the rankings for the third consecutive year as the best jurisdiction for doing business. The state comes out in front for its payroll tax system and planning processes, whilst ranking in the top three for property taxes and business licensing.
At the opposite end, Victoria remains the most challenging state for business, weighed down by uncompetitive rankings for property taxes and charges, payroll taxes, and business licensing requirements. As the second most populous state accounting for almost a quarter of the nation’s gross domestic product, Victoria’s poor performance has an outsized impact on national competitiveness.
The differences are substantial. For payroll tax alone, rates range from South Australia’s 4.95 per cent to the Australian Capital Territory’s 7.85 per cent for large employers. Thresholds vary from $1 million in Victoria and Western Australia to $2.5 million in the Northern Territory.
For small businesses operating on tight margins, these variations translate directly to profitability. A café in Tasmania requires approximately 66 per cent more licences and regulatory obligations compared to the same café in the Northern Territory, according to the report’s analysis.
Smart strategies for overwhelmed owners
Whilst regulatory complexity won’t disappear overnight, smart SME owners are finding ways to navigate the maze whilst rising costs, labour shortages, and complex regulatory environments continue pressing on all sides.
First, understand your state’s specific requirements. The Regulation Rumble report provides detailed scorecards on payroll taxes, property charges, retail trading hours, workers compensation, licensing, and insurance duties. Knowing where your jurisdiction ranks helps you anticipate costs and plan accordingly.
Second, leverage technology to reduce compliance burden. Over 5.2 million pre made HR and health and safety documents were downloaded globally in the last year, a 44.2 per cent increase on the previous twelve months, as businesses turn to automated solutions. Modern platforms can handle payroll, onboarding, compliance, and award interpretation, dramatically reducing risk and administrative time.
Third, consider location strategically. If you’re planning expansion or relocation, regulatory environment should factor heavily into your decision. For businesses with flexibility, operating in South Australia, Tasmania, or the Northern Territory, the top three ranked jurisdictions, offers tangible competitive advantages through lower compliance costs and more efficient processes.
Fourth, consolidate your systems. Sixty three per cent of SMEs still rely on three or more disconnected HR or payroll systems, which not only increases admin but opens the door to costly mistakes. Unified platforms reduce errors whilst freeing up time for revenue generating activities.
Your competitive edge
The regulatory landscape is shifting. Most state and territory governments are working to improve their settings, particularly around housing supply and planning systems. New South Wales, Victoria, and Western Australia have announced substantial planning reforms, though many changes are still being implemented.
For SME owners, this creates opportunity. Businesses that stay informed about regulatory changes, choose locations strategically, and invest in compliance technology position themselves ahead of competitors still wrestling with manual processes and outdated systems.
The research shows competitive tax systems and effective regulation are part of the economic fundamentals necessary for a more resilient, diversified, and dynamic economy. Jurisdictions achieving higher rankings are generally better placed to capture business investment and support employment growth.
As more than one in five SMEs report that productivity barriers are driving up wage costs and holding back innovation and growth, reducing regulatory friction becomes even more critical.
The patchwork of regulation across the nation discourages investment and creates barriers for companies expanding across state lines. But for informed business owners, understanding these differences transforms regulatory complexity from an overwhelming burden into strategic intelligence.
The states and territories are engaged in what the Business Council describes as a “race to the top” in regulatory improvement. SME owners who track these changes, advocate for sensible reform, and position their businesses in more competitive jurisdictions will find themselves with time, money, and energy to focus on what matters most: serving customers and growing their business.
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