Navigating the complex landscape of regulatory compliance can be a daunting challenge for small and medium-sized enterprises (SMEs). Unlike large corporations, SMEs often operate without the support of dedicated legal and compliance teams, making it difficult to stay up-to-date with the ever-evolving regulatory environment. However, maintaining compliance is not just about avoiding legal issues—it’s about protecting your business’s reputation, fostering trust with customers, and ensuring long-term success. 

To support SMEs in managing their compliance responsibilities, we’ve developed an in-depth checklist that covers the essential areas of regulatory compliance. By following this guide, SMEs can streamline their efforts and focus on what truly matters: growing their business. 

1. Business Registration and Licensing

Before you even start operations, it’s crucial to ensure that your business is legally established and fully compliant with all registration and licensing requirements. Key steps include: 

• Business Name Registration: Register your business name with the appropriate local or national authorities to ensure it is unique and legally protected. This step helps prevent legal disputes and establishes your brand identity. 

• Licenses and Permits: Depending on your industry and location, specific licenses or permits may be required to operate legally. Conduct thorough research to identify all necessary documents and obtain them promptly to avoid fines or shutdowns. 

• Tax Registration: Register for all applicable taxes, including income tax, sales tax, and payroll tax. This ensures your business is recognised by tax authorities and helps you avoid penalties for non-compliance. 

2. Employment Law Compliance

As an employer, it’s essential to adhere to employment laws to protect both your business and your employees. Failing to comply can result in costly legal disputes and damage to your reputation. Focus on the following areas: 

• Employee Contracts: Ensure that all employees have legally compliant contracts that clearly outline their rights, responsibilities, and terms of employment. This protects your business from potential legal challenges and provides clarity to your employees. 

• Wages and Overtime: Adhere strictly to minimum wage laws and ensure that employees are properly compensated for overtime work. Non-compliance in this area can lead to severe penalties and damage employee morale. 

• Health and Safety: Implement robust workplace health and safety measures in line with local regulations. This not only ensures compliance but also helps prevent workplace accidents and promotes a positive work environment. 

• Anti-Discrimination: Comply with anti-discrimination laws to create an inclusive workplace where all employees are treated fairly. This is vital for fostering a positive company culture and avoiding legal repercussions. 

3. Data Protection and Privacy

In today’s digital age, protecting the personal data of customers and employees is of paramount importance. Compliance in this area not only safeguards your business but also builds trust with stakeholders. Essential steps include: 

• Data Protection Policies: Develop and implement comprehensive policies and procedures for protecting personal data. This includes secure data storage, restricted access, and regular audits to ensure compliance with data protection laws. 

• Data Breach Response: Establish a clear plan for responding to data breaches. This should include notifying affected individuals and relevant authorities promptly, as well as measures to mitigate further damage. 

• Privacy Notices: Clearly inform customers and employees about how their data is collected, used, and protected. Transparency is key to building trust and ensuring compliance with privacy regulations. 

4. Financial Compliance 

Effective financial management and reporting are crucial for both legal compliance and business success. Neglecting financial compliance can lead to severe legal and financial consequences. Prioritise the following: 

• Accurate Record-Keeping: Maintain meticulous financial records, including detailed accounts of income, expenses, and payroll. Accurate record-keeping is essential for tax compliance and financial planning. 

• Tax Compliance: Ensure that all required tax returns are filed on time, and stay informed about changes in tax laws that may affect your business. Non-compliance can result in hefty fines and interest charges. 

• Anti-Money Laundering (AML): If your business operates in a high-risk industry, implement robust AML measures to detect and prevent money laundering activities. Compliance in this area is critical for protecting your business from legal risks. 

5. Intellectual Property Protection 

Your business’s intellectual property (IP) is a valuable asset that must be protected. Safeguarding your IP not only preserves your competitive edge but also prevents costly legal disputes. Key actions include: 

• Trademark Registration: Register trademarks for your business name, logo, and any unique product names. This ensures your brand is legally protected and prevents others from using similar marks. 

• Copyright Protection: Secure copyright protection for original content, such as software, artwork, and written material. This legal safeguard prevents unauthorised use of your creative works. 

• Patent Protection: If your business has developed a new product or process, consider applying for a patent to protect your innovation from being copied by competitors. 

6. Environmental Compliance 

Environmental regulations are becoming increasingly important, particularly for businesses in industries with significant environmental impacts. Compliance not only protects the planet but also enhances your brand’s reputation. Focus on: 

• Waste Management: Properly dispose of waste according to local regulations and explore sustainable practices that reduce your environmental footprint. 

• Emissions and Pollution Control: Ensure compliance with regulations regarding emissions and pollution, particularly if you operate in manufacturing or other high-impact industries. Non-compliance can result in fines and reputational damage. 

• Sustainable Practices: Adopt environmentally friendly practices, such as reducing energy consumption and sourcing sustainable materials. These practices not only help the environment but can also attract eco-conscious customers. 

7. Consumer Protection Laws 

If your business sells products or services to consumers, you must comply with consumer protection laws. These regulations are designed to ensure fairness and transparency in your dealings with customers. Key areas include: 

• Product Safety: Ensure that all products meet relevant safety standards and regulations. This is crucial for protecting consumers and avoiding costly recalls. 

• Advertising Standards: Be honest and transparent in your advertising and marketing efforts. Misleading or false claims can result in legal action and damage to your brand. 

• Refund and Return Policies: Clearly communicate your policies on refunds, returns, and exchanges to customers. Transparent policies help prevent disputes and build trust with your customers. 

8. Cybersecurity Measures 

In an increasingly digital world, cybersecurity is a critical area of compliance. Protecting your business from cyber threats is essential for maintaining operational integrity and safeguarding sensitive data. Important steps include: 

• Secure IT Systems: Implement robust security measures, such as firewalls, antivirus software, and regular system updates. These defences are crucial for protecting your business from cyberattacks. 

• Employee Training: Provide regular training to employees on cybersecurity best practices, such as recognising phishing attempts and securing their devices. An informed workforce is your first line of defence against cyber threats. 

• Incident Response Plan: Develop a comprehensive incident response plan for dealing with cybersecurity incidents, including data breaches. This plan should outline procedures for mitigating damage, notifying stakeholders, and restoring operations. 

9. Industry-Specific Regulations 

Depending on your industry, there may be additional regulations you need to comply with. These can vary significantly and may require specialised knowledge or advice. Examples include: 

• Healthcare: Compliance with healthcare regulations, such as the Health Insurance Portability and Accountability Act (HIPAA) in the U.S., is essential for protecting patient privacy and avoiding legal penalties. 

• Financial Services: If you operate in the financial sector, ensure adherence to regulations such as those set by the Financial Conduct Authority (FCA) in the UK. Compliance is crucial for maintaining trust and avoiding hefty fines. 

• Food and Beverage: Businesses in the food and beverage industry must comply with stringent food safety standards and regulations to ensure the health and safety of consumers. 

Conclusion 

Compliance is a fundamental aspect of running a successful SME, ensuring your business operates within the law, protects its interests, and maintains trust with stakeholders. While the regulatory landscape can be complex and ever-changing, following this comprehensive checklist can help you navigate your compliance obligations with confidence. Regularly review and update your compliance measures to stay aligned with evolving regulations and industry standards. By prioritising compliance, SMEs not only safeguard themselves against legal pitfalls but also lay a strong foundation for sustainable, long-term success. 

Economists are suggesting that the odds are 68% in favour of this occurring.

Whether this will deliver the stimulatory effect that the RBA and indeed the Federal Government is looking for will remain to be seen.

With both sluggish wage growth and productivity, we don’t see that further interest rate cuts will have the effect that is desired by the RBA. Wages growth, in particular, has been somewhat stagnant at around 2% for several years, after taking into account inflationary figures wage growth has been minimal. It seems that many economists are a little baffled as to why this is so and indeed it is an international problem among many developed economies. Obviously, if we have reasonable wage growth it provides more disposable income which is, of its own accord, normally provides the desired stimulatory effect to the economy.

Given the rapid rise of permanent and temporary migration wherein there is competition for unskilled labour then it is not surprising that wages growth continues to be sluggish.

Add to this a lack of improved productivity and the current record low interest rates it seems to us that even with a further cut the RBA does not have many more levers to pull to stimulate the economy. The question will be whether there will be a further reduction to 0.25%. In any event, we do not see the likelihood of any rises in rates in the foreseeable future.

Their aim is to match taxable income against high valued assets to determine if income has been understated. In other words, if you are found to own a $2m Riviera and are only showing a taxable income of $80K then you are going to get audited.

We understand that about 350,000 taxpayers are in the firing line and the ATO investigation will determine who is understating their income, made spurious GST credit claims, or have not reported capital gains made on sold items.

The thresholds the ATO will be using for their investigation are as follows:-

Yachts with a value in excess of $100k

Vehicles with a value in excess of $65k

Horses with a value in excess of $65k

Fine art with a value in excess of $100k

Aircraft with a value in excess of $150k

If any of these apply to you are on the ATO radar.

There is a multitude of reasons for businesses to make a significant investment in digitalisation and automation.

Primarily, when doing so, the objectives of businesses are to: –

• Increase Efficiency
• Cut Costs; and
• Increase Profits

However, as of the 1st of July 2019 the increased reporting requirements the ATO have put in place by way of STP (single touch payroll), have begun to create the perfect storm of compliance issues for organisations big and small. The complexities of the AWARD system that all businesses must abide by can be incredibly difficult to interpret due to ambiguous statements, lack of definitions, and so on. Furthermore, even once a business has interpreted and is putting in the payroll systems required to meet legislative requirements, there is a serious challenge in policing all facets of the AWARD and the absence of a comprehensive system will leave a huge margin for error.

There have been very recent and well-publicised issues throughout Australia in recent times exposing the underpayment of wages for a lot of giant companies and, whilst it’s no secret that some of these cases may be due to mismanagement or negligence, there are a huge amount of small and medium businesses that are likely making the same or similar mistakes due to a simple inability to manage the overwhelming amount of complexity created by the Fairwork.

Some of the items that need to be addressed for employing people when applying AWARD rates are: –

• Age
• Exactly what tasks will they be completing and how does that affect their classification, their level, or their pay rate?
• Does their role cross over between two different levels or classifications?
• How many hours will they do regularly? Does that make them part-time, full time, or casual?

In addition, you need to be able to plan their shifts?

1. What time should their break be and what happens if they take it late?
2. They finished late last night and are back in this morning, are there any issues around short times between shifts?
3. A supervisor went home ill halfway through their shift and a more junior person needed to step up. What happens to their rate?
4. A full-time staff member has done 12 hours one day but only 6.5 for the other 4 days, do they get overtime?

Along with a multitude of other potential problems.

This is where a robust and more comprehensive automation system becomes a huge benefit. Not only will you attain the results stated above but you will immediately reduce your risk of payroll errors and potential claims from staff.

You could be underpaying or overpaying staff and don’t even know it? We recently uncovered unintentional overpayments of wages of ~$420,000.00 per annum, all for the reasons above.

Fortunately, this may not necessarily present a risk due to no underpayments, however, changing structures to meet reduce to award payments would certainly ‘rock the boat’ for other reasons and potentially cause hefty disruptions to business operations.

It is the responsibility of all managers to provide a safe work environment for their employees and to ensure that safety practices are in place at all times.

In order to provide a safe work environment, you must:

• Provide and maintain safe machinery and structures
• Provide safe ways of working
• Ensure safe use, handling, and storage of machinery, structures, and substances
• Provide and maintain adequate facilities
• Provide any information, training, instruction, or supervision needed for safety
• Monitor the health and safety of workers and conditions at the workplace

Workers responsibility:

• Must take care of their own health and safety
• Ensure that they do not do anything that could cause injury to others
• Follow WHS instructions
• Follow the workplace’s policies and procedures

Each state has its own WHS laws and a regulator to enforce them. The WHS framework in each state includes:

• The Act which outlines your broad responsibilities
• Regulations which set out specific requirements for particular hazards and risks, such as noise, machinery, and manual handling
• Codes of Practice which provide practical information on how you can comply with the requirements of the Act and Regulations
• The regulating agency administers WHS laws, inspects workplaces, provides advice, and enforces the laws. In Western Australia, this is WorkSafe WA. For further information go to http://www.commerce.wa.gov.au/WorkSafe/

When sound WHS policies and procedures are implemented, this is a legal requirement, there are considerable benefits to your business:

• Helps with staff retention
• Improves productivity
• Reduces injury and illness in the workplace
• Reduces the cost of injury and workers compensation costs

Under the Act, there are specific requirements for the risks involved in particular businesses. To check your industry go to https://www.business.gov.au/Planning/Industry-information

Emergency plans and first aid

Readiness to respond to an incident is a key part of your obligations. To this extent you should have an emergency plan in place which covers:

• Have you done a first aid assessment of your business?
• Do you have enough trained first aid officers to cover unplanned staff absences?
• Is the first aid equipment in your workplace easy to find and access?
• Does your workplace run emergency drills?
• Have you evaluated your business activities to identify areas of increased risk?

Summary

As can be seen from the foregoing the regulations covering WHS are quite wide so management must ensure that their internal policies and procedures are up to date with particular reference to acceptable behaviour such as bullying and harassment in the workplace.

In addition, management must be aware of issues such as staff behaviour at work functions, particularly where alcohol is being served. Whilst such functions are social in nature it is still incumbent on employers to ensure the safety of their staff at all times.

For a business to ensure they’re meeting all of these obligations is incredibly challenging on their own and, in fact, there are a lot of businesses that aren’t meeting all of their obligations correctly even when they have advisors in place.

Operating a business in today’s environment requires compliance in a number of critical areas such as:-

Australian Taxation Office (ATO)

Superannuation Guarantee (SGC)

Australian Securities and Investment Commission (ASIC)

State Revenue Office (OSR)

Fair Work Australia (FWC)

Australian Competition & Consumer Commission (ACCC)

Department of Mines, Industry Regulation and Safety (DMIRS)

Office of the Australian Information Commissioner (OAIC)

Equal Opportunity Commission (EOC)

All business managers must be aware of the requirements of any of these agencies as failure to comply can lead to actions that result in various penalties from fines to incarceration.

In summary, the basic compliance requirements are as follows:-

ATO

Income Tax: All businesses must have accounting systems that comply with the Income Tax Act. This involves reporting on all income and expense of the business as per ATO reporting standards.

From a management point of view, one should remember that tax avoidance, i.e. only paying the amount of tax you are required to by law is not a crime however tax evasion or failing to declare taxable income is a crime.

GST: Similar to income tax all businesses with an income over the GST threshold of $75,000 must register for and comply with the GST Act.

Superannuation Guarantee: This is administered under the auspices of The ATO and requires employers to contribute a percentage, currently 9.5%, of an employee’s assessable income to their nominate superannuation fund.

ASIC: The Australian Securities and Investment Commissions’ charter or role, pursuant to The ASIC Act 2001, is as follows:-

• maintain, facilitate and improve the performance of the financial system and entities in it
• promote confident and informed participation by investors and consumers in the financial system
• administer the law effectively and with minimal procedural requirements
• receive, process and store, efficiently and quickly, the information we receive
• make information about companies and other bodies available to the public as soon as practicable
• take whatever action we can, and which is necessary, to enforce and give effect to the law.

ASIC is also responsible for such things as business registration and incorporation, annual solvency reporting, and oversight of insolvency practitioners and financial planners.

As can be seen, ASIC has an extremely wide charter and has powers similar to those of a royal commission to enforce or prosecute in accordance with The Act.

OSR: The Office of State Revenue is responsible for the administration and collection of duties such as payroll tax, stamp duties, and land tax.

Insofar as a business is concerned compliance with payroll tax is the principal concern. Currently, in WA the threshold requirement for payroll tax is $850,000 however this is being increased to $950,000 from the 1^st January 2020 and subsequently $1m from January 1, 2021.

Responsible management must ensure that they are aware of and are complying with any duties that may be payable.

FWC: The Fair Work Commission has oversight of The Fair Work Act 2009. In principle, this relates to ensuring compliance with the various awards that govern employee pay. At present, there are some 120 awards underpinning Australia’s payroll system.

The FWC also has powers to deal with other issues such as unfair dismissal claims, anti-bullying claims, and approving enterprise agreements.

Whilst there is some ambiguity in the interpretation of modern awards it is incumbent on management to seek advice to ensure that they are applying the correct award(s) to their employees.

ACCC: The Australian Competition and Consumer Commission has oversight of the Competition and Consumer Act 2010. Its charter is to promote competition amongst businesses, promote fair trading by business and protect consumers in their dealings with business.

In particular, managers involved in trading with consumers must make sure they comply with the act. (The act does not apply to commercial based trading).

DMIRS: The Department of Mines, Industry Regulation, and Safety is a state-based department in WA which regulates various industries including, building services, electrical, plumbing, real estate (property sales and rental). Its charter also includes environmental management and regulation, public and private labour regulations, consumer protection, and workplace safety regulation.

The issue of workplace safety is the area most managers need to be compliant with. There are serious penalties that apply where workplace safety is compromised or management is negligent in ensuring that safety standards are adhered to.

OAIC: The Office of the Australian Information Commissioner is responsible for enforcing The Privacy Act 1988 which applies to organisations with a turnover in excess of $3m as well as some specific organisations such as health services and credit reporting agencies.

In essence, the Act regulates the way in which personal information is handled. It allows individuals to know how their personal information is being collected and how it is being disseminated, ensures that corrections are made where there is an error in the information, and to stop receiving direct marketing paraphernalia.

Breaches of the act are subject to substantial fines so management must ensure that the recording and use of their client’s personal information are maintained in accordance with the act.

EOC:  The Equal Opportunity Commission has responsibility for encouraging recognition and understanding of the principles of equal opportunity and also to provide redress to individuals where unlawful discrimination has occurred.

All managers must ensure that in the general conduct of their business that they observe at all times the principles enunciated by the act.

Compliance with the obligations of the SGC is critical as non-compliance can lead to significant penalties being imposed by the ATO.

In complying with your obligations pursuant to the SGC the following rules need to be observed:-

Returns must be lodged and paid on a minimum quarterly basis

The current charge is 9.5% of ordinary time earnings. This excludes overtime and other items such as termination payments, unused annual leave, long service leave, sick leave, payments in compensation for unfair dismissal, salary sacrifice amounts,  employee wages less than $450 per month, and employees under 18 who have worked less than 30 hours per week.

There are also certain contractors for whom SGC is payable. These are primarily where a contract is for labour only. For example, if you employ a freelance bookkeeper and the contract provides that the individual contracted must perform the work themselves but has an ABN and invoices for the hours worked then that individual is considered an employee for SGC purposes and the levy is therefore payable.

When employing the employee is required to advise the employer of their super fund details within 28 days of the commencement of employment or the employer must add them to their default fund.

As indicated there are significant penalties for failure to lodge and pay your SGC obligations on time. In summary, these are as follows:-

Where SGC payments are not made by the due date you are required to complete an SGC calculator form which will calculate any shortfall amounts plus interest charged at the current rate of 10% and in addition there is an administration charge of $20 per employee per quarter.

The total amount subsequently paid including interest and administration charges is not allowed as a deductible expense for taxation purposes where payments have not been received by the due date.

The net effect of this is that on top of the penalties imposed as the expense is not deductible for taxation purposes taxation at the company tax rate is payable on any such amounts.

The due dates for lodging and paying SGC liabilities are as follows:-

Quarter                Period                                                   Due Date

1                              1 July – 30 September                    28 October

2                              1 October – 31 December              28 January

3                              1 January – 31 March                     28 April

4                              1 April – 30 June                             28 July

The payments must be received by your superannuation clearinghouse by the due date. This means that the reports and payments should be made three days prior to the due date to ensure funds are received by the due date.

In order to ensure compliance, we recommend that our clients lodge their returns monthly particularly in light of the introduction of One Touch Payroll as the ATO has access to all payroll transactions and is aware of SGC liabilities.

With respect to Western Australia, the rate of the payroll tax is 5.5% which is levied on any wages in excess of $950,000 (effective January 1, 2020) however the tax is calculated on a sliding scale basis on the excess of $950,000 and the deductible ceases for wages greater than or equal to $7.5M.

There are some important compliance issues with respect to payroll tax. In summary, these are as follows:-

Taxable Wages:

• These include
• Salaries and wages
• Commissions bonuses and allowances
• Remuneration paid or payable to a director
• Superannuation contributions
• Fringe benefits
• Salary sacrifice arrangements
• Termination payments
• Contributions to industry redundancy fund or portable long service leave fund
• Employee share acquisitions
• Payments to certain contractors

For clarification of taxable wages in WA go to- https://www.wa.gov.au/organisation/department-of-finance/payroll-tax#taxable-wages

Exempt Wages:

• Maternity Leave
• Parental and adoption leave payments
• Paid parental leave
• Workers compensation payments
• Some profit and trust distributions, and loans deemed to be income to the beneficiary of shareholder
• Some motor vehicle and accommodation allowances
• Overnight accommodation for allowances paid to truck drivers

For clarification of exempt wages in WA go to- https://www.wa.gov.au/organisation/department-of-finance/payroll-tax-exemptions

Grouping Provisions: For the purpose of calculating payroll tax the OSR groups entities where any of the following exist:-

• One company is related to another company under the Corporations Act 2001 (Cth)
• An employee or employees of one business perform duties for or in connection with another business, whether by the arrangement or otherwise
• The same person or persons have a controlling interest of more than 50% in each of two or more businesses
• An entity has a direct, indirect, or aggregate controlling interest in a corporation

Where a group exists the deductible amount is applied to one member of the group with the balance of group members paying the tax on all assessable wages.

For clarification of grouping provisions in WA go to:-https://www.finance.wa.gov.au/cms/uploadedFiles/_State_Revenue/Pay-roll_Tax/Payroll_Tax_Fact_Sheet_-_Grouping_Provisions.pdf

It is important that employers comply with all aspects of the payroll tax act as there are significant fines and or penalties imposed by all state governments for non-compliance.

Depending on turnover businesses are required to lodge Business Activity Statements either monthly or quarterly which detail the amounts of GST collected through their sales and the amount of GST paid through their purchases with the net amount being payable to The Australian Taxation Office.

In addition, businesses are required to lodge Instalment Activity Statements either monthly or quarterly which detail the amounts of PAYG Tax deducted from employees’ wages which are payable to The Australian Taxation Office.

In order to comply with the reporting obligations, all businesses must register for an Australian Business Number.

When registering a business must elect as to whether they report on a cash basis if their turnover is less than $2 million or an accruals basis. Where turnover is greater than $2 million accruals reporting is compulsory however where it is under $2 million this is optional.

In addition to GST and PAYG, there are also reporting requirements for Fringe Benefits Tax, Wine Equalisation Tax, and Fuel Tax where an entity is exposed to these liabilities. Management must check or seek advice as to whether they must report on these issues.

GST is currently levied at 10% of all dutiable transactions. In this sense, the act is somewhat complicated as certain goods and services are exempt from GST such as fresh food and health services.

All business managers must ensure that their administration and accounting systems are recording correctly all income and expense transactions.

In addition to the reporting requirements there also strict rules as to the production of Tax Invoices which specify what information they must contain. There is no particular standard for the layout of an invoice rather the information it must contain. Listed below are the current requirements of the information that must be included on a tax invoice:

• Company Name
• Company ABN
• Date of Issue
• The Words “Tax Invoice”
• Customer Name and Address
• Brief Description of each item supplied and the quantity
• Sub Total
• The Amount of GST
• The Total Amount payable

All accounting systems such as Xero and MYOB have templates in place that meet the standards required under the Act.

When lodging your BAS you can not claim a deduction for a GST amount unless you are in possession of a valid tax invoice.

Fortunately today accounting systems such as Xero are automated to the extent that they receive email PDF copies of invoices copies of which are retained in the accounting software satisfying ATO record keeping requirements.

From an accounting and reporting perspective, it is important to remember that GST is neither income nor expense as it is not your money and as such is ignored in all financial reports such as Profit and Loss and Balance Sheets (other than as an amount owed to the ATO). It is obviously included however in amounts owed by debtors or creditors.

In conclusion, it must be remembered that significant penalties apply for failure to lodge BAS and IAS, for misreporting and or deliberately understating or overstating GST amounts owed. It is therefore incumbent on management to ensure that all transactions are accurately reported and amounts owing are remitted to The ATO as per their reporting schedule.