- Anthony Roberts/
- February 2020/
Legal changes are occurring all the time for businesses, but seemingly minor changes can add up to big effect for SMEs – what’s new for you and your business and how can you shore up against this risk?
According to this year’s Allianz Risk Barometer, “changes in legislation and regulation” tops the risk list for Australian companies, even though globally it only ranks fourth. In fact, more than a third (36%) of respondents rated legislative change the top risk, compared with just over a quarter (28%) last year.
There’s no question that political uncertainty and frequent leadership changes have contributed to a sense of uncertainty in Australia, including about which way legislators will jump, while globally, cyber incidents and business interruption were considered much greater risks.
It is also true however, that companies globally are more worried about changes in legislation and regulation than they were last year – which is hardly surprising given looming geopolitical storm clouds such as Brexit and the US-China trade wars and tariff negotiations.
Nonetheless, for Australian businesses “changes to legislation” has risen quickly through the list to the top of the risk chart, and such changes often disproportionately burden small and medium businesses which can struggle more than larger businesses to comply with change.
The good news
There are some positives however. Some legislative or regulatory changes – while necessary and important for consumers, staff welfare or other groups – present a risk to businesses, especially SMEs, others offer good news. For instance, the Australian Small Business and Family Enterprise Ombudsman identifies wins for small businesses in the 2019 Budget here – including tax cuts; infrastructure investment; increased instant asset write off; support for vocational training; and increased export grants scheme funding.
Similarly, the ATO has recently brought in single touch payroll for businesses which employ 19 or fewer employees, designed to simplify reporting to the ATO by allowing for simple transition of salaries and ways, allowances, deductions, and PAYG information.
We also wrote recently about Prudential Standard APS 120, designed to ensure that deposit-taking institutions (including asset finance companies) adopt prudent practices to manage the risk associated with securitisation. APS 120 will partially counter shrinking bank lending to small business, while at the same time protecting consumers, by allowing quality finance providers better access to capital markets – which should help lower the cost of funding. This means that SMEs businesses can potentially benefit from lower leasing costs and more flexible terms overall.
Strengthening businesses from the inside out
It’s hard to stay one step ahead of a risk that you can’t see coming. Of course, it’s important to stay up-to-date with changes and proposed changes in your industry, but one key way to mitigate this risk is to ensure that your financial health puts you in the best position to absorb any changes.
This means a healthy cashflow and balance sheet, and preserving your capacity to borrow for when you need it the most.
If you utilise asset or equipment finance, also known as finance or operating leases, to fund your business where appropriate, you can smooth your cashflow by paying for an asset in smaller, regular payments rather than one lump sum, you can keep your equity or your capacity for bank debt for non-asset-purchase cash needs, and you can sometimes keep the purchase off your balance sheet. In this way, leveraging asset financing can help you achieve all these treasury goals to make sure that you are as protected as possible against future developments.
Other recent regulatory changes for businesses
Many changes are sector-specific, with each industry experiencing its own regulatory pains. There are a raft of changes that have come in during the last year, from food labelling to gift cards to heavy vehicles. While these only affect specific industries, others will affect businesses nationally, for example:
Updates to the National Privacy Act – Data Breach Changes: As of last year, businesses with an annual turnover of more than $3 million are required comply with the Notifiable Data Breaches Scheme under the Privacy Act 1988. A data breach occurs when unauthorised personal information is accessed or released.
If the breach is likely to cause serious harm to an individual, businesses are obligated to notify both the individual involved, and the Office of Australian Information Commissioner (OAIC).
National minimum wages increase: National minimum wage increased 3.5% to $18.93 per hour last year.
Changes to casual & part-time entitlements in some awards: The Fair Work Commission made changes in 2018 to some award rates and minimum shift entitlements for casual and part-time employees.