NEW ZEALAND BUSINESS NEWS
Empowering Kiwi Businesses
Kiwi SMEs are struggling with the growing regulatory burden that impacts productivity and growth.
For many small business owners in New Zealand, compliance requirements have become an increasingly significant aspect of running their operations. Research from the New Zealand Productivity Commission has highlighted that regulatory compliance represents a disproportionate burden for smaller businesses compared to their larger counterparts. According to their 2020 report, smaller firms typically face compliance costs that are 50-90% higher per employee than larger businesses.
This disparity exists because many compliance costs are fixed rather than varying with business size. When a regulatory change occurs, both a company with five employees and one with five hundred must understand and implement it—but the smaller business has fewer resources to absorb this work.
The compliance landscape in New Zealand is particularly challenging because of its complexity. The World Bank’s Doing Business report historically ranked New Zealand highly for ease of doing business overall, but compliance requirements span multiple regulatory domains managed by different government agencies, creating a complex web of obligations for business owners to navigate.
For New Zealand’s small businesses, compliance costs manifest both directly and indirectly. Direct costs include permit fees, registration charges, and payments for professional services like accountants and legal advisors to ensure regulatory requirements are met.
MYOB’s 2021 Business Monitor survey revealed that small business owners in New Zealand spent approximately $400 million annually on tax compliance alone. For individual businesses, this represents thousands of dollars that could otherwise be invested in growth, innovation, or improving their competitive position.
Indirect costs are harder to quantify but potentially more significant. These include the opportunity cost of time spent on compliance rather than core business activities. Stats NZ’s Business Operations Survey has consistently identified regulatory compliance as one of the top barriers to innovation and business growth cited by New Zealand firms.
A 2019 survey by the Auckland Chamber of Commerce found that small business owners were spending an average of 6 hours per week dealing with compliance matters—equivalent to approximately 24 hours per month. For a sole trader or small business owner, this represents a substantial portion of available productive time.
Several specific regulatory domains contribute significantly to the compliance burden for New Zealand small businesses:
Tax compliance remains one of the most time-consuming areas for small business owners. While Inland Revenue has invested in digital systems to streamline processes, the 2018 Tax Working Group acknowledged that “compliance costs fall disproportionately on smaller businesses.” The introduction of payday filing requirements in 2019 added new regular reporting obligations for employers.
Employment legislation in New Zealand has seen considerable evolution in recent years. Changes to the Employment Relations Act, increases to minimum wage rates, expansion of parental leave entitlements, and implementation of domestic violence leave have all required businesses to update policies and practices. The Ministry of Business, Innovation and Employment (MBIE) recognises that keeping up with these changes can be challenging for small employers without dedicated HR staff.
Health and safety requirements under the Health and Safety at Work Act 2015 introduced more stringent obligations for businesses of all sizes. WorkSafe New Zealand’s own research indicates that small businesses often struggle to interpret and implement these requirements effectively. A 2018 MBIE evaluation found that 57% of small businesses reported difficulty understanding their obligations under the Act.
Environmental regulations have expanded as New Zealand works toward sustainability goals. The introduction of the Climate Change Response (Zero Carbon) Amendment Act 2019 has created new reporting requirements for businesses in certain sectors, though many small businesses remain exempt from direct obligations at present.
The New Zealand government has recognised the challenges compliance poses for small businesses and has implemented several initiatives aimed at reducing this burden.
The Small Business Council, established in 2018, made reducing compliance costs one of its key recommendations in its strategy document “Empowering Small Businesses to Aspire, Succeed and Thrive.” This has led to the Better for Business programme, which aims to reduce compliance costs by making government services more accessible and business-friendly.
Regional Business Partner Network, supported by New Zealand Trade and Enterprise and Callaghan Innovation, provides advice and support to small businesses navigating regulatory requirements. This includes limited funding for professional advice and capability development.
Business.govt.nz serves as a central resource hub guiding on compliance matters. Their online tools include compliance cost calculators and simplified guides to regulatory requirements across different business activities.
Industry associations also play an important role in supporting compliance efforts. Organisations such as BusinessNZ, Retail NZ, and the Employers and Manufacturers Association offer members access to templates, advisors, and peer networks to share effective compliance strategies.
For many small businesses, technology offers the most promising path to managing compliance more efficiently. Accounting software providers like Xero and MYOB have developed features specifically designed to streamline tax compliance and financial reporting, while HR platforms can help manage employment-related obligations.
As compliance demands continue to evolve, New Zealand’s small business community will need ongoing support and simplified regulatory frameworks to ensure that compliance costs don’t undermine the viability and competitiveness of the businesses that form the backbone of the country’s economy.
References:
New Zealand Productivity Commission. (2020). New Zealand firms: Reaching for the frontier. Wellington, New Zealand.
Ministry of Business, Innovation and Employment. (2018). Health and Safety at Work Act 2015 implementation: Evaluation findings. Wellington, New Zealand.
Small Business Council. (2019). Empowering Small Businesses to Aspire, Succeed and Thrive. Wellington, New Zealand.
MYOB. (2021). MYOB Business Monitor: Tax Compliance Costs. Auckland, New Zealand.
Auckland Chamber of Commerce. (2019). Small Business Survey: Regulatory Compliance. Auckland, New Zealand.
Tax Working Group. (2018). Future of Tax: Final Report. Wellington, New Zealand.
Stats NZ. (2021). Business Operations Survey 2020. Wellington, New Zealand.
World Bank. (2020). Doing Business 2020: Comparing Business Regulation in 190 Economies. Washington, DC.
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