Six regulatory risks for small business in 2025

Small businesses need to be aware of new rules coming in to effect in 2025.

Small businesses end the year amidst economic and regulatory uncertainty.

Rising energy, rent, insurance and borrowing costs have made the operating environment unbearable for many. Insolvencies are at record highs.

Adding to the strain is a flurry of new regulations with significant compliance costs for small business.

Here are six areas to watch in 2025:

1. Criminal penalties for underpayment

2024 saw a complex industrial relations system become even more complex.

More than thirty-five major changes were made to the 1200-page Fair Work Act in just over two years.

From January 1, the newly introduced concept criminalising wage underpayment takes effect. An individual found guilty of deliberately underpaying their staff face up to 10 years’ jail time, and companies face up to $7.5m in fines.

A voluntary compliance code has been introduced to support small businesses navigate the complex labyrinth of awards, standards, and entitlements.

Importantly, the code recognises “reasonable efforts’ by employers amidst a convoluted regime.

Adherence to the voluntary code provides a safe harbour against criminal prosecution and should be examined closely by small employers.

2. The right-to-disconnect

Recent industrial changes let the “right-to-disconnect” genie out of the bottle.

Currently in force for larger enterprises, small businesses have until August 2025 to make any relevant changes required.

Big business is already grappling with uncertainty when trying to conclude what is “unreasonable” contact with an employee.

Small businesses pride themselves on providing flexible and rewarding arrangements for their employees, yet there is genuine fear this new law will only create conflict where it does not currently exist.

Small business owners should watch interim developments closely.

3. Cyber and ransom obligations

Cyber security will remain a big issue for small business in 2025.

The average cost of a cyberattack is almost $50,000 and a cybercrime occurs every six minutes.

Australia’s first ever National Cyber Strategy was introduced this year and largely welcomed for its “Team Australia” approach.

The cyber policy has positives including education, awareness and even accreditation through our own industry-led Cyber Wardens program.

However, one gremlin for small businesses to watch out for in 2025 will be potential penalties of up to $20,000 if they fail to report a ransomware payment within 72 hours.

Small businesses should familiarise themselves with services such as 1300 CYBER1 to reduce risk and ensure the government helps not hinders them in the event of an attack.

4. Bookkeepers under the microscope

New obligations for registered tax practitioners come into play from January 1.

A ham-fisted approach by government led industry to worry they would be required to disclose their own personal health information to clients.

Negotiation saw a delayed timeline secured for small business tax practitioners who now have until July 1, 2025 to abide by the new rules.

The work of bookkeepers in supporting small business cannot be overstated; many are small businesses themselves.

Practitioners should seek advice from their relevant accreditation body such as the Institute of Certified Bookkeepers ahead of July 1.

5. An overdue review into payroll tax

Following joint advocacy from the Mortgage Finance Association Australia (MFAA) and the Commercial Asset Finance Brokers Association (CAFBA), the NSW parliament has launched an inquiry into state’s worst tax: payroll.

Small business has been anxious since a court harshly found a company providing services to brokers owed payroll tax on commissions paid by banks.

MFAA estimates this would cost the average sole-trader broker $68,000, or a third of their gross income.

There is huge concern of contagion. Companies in various sectors – from cleaning, direct selling, to logistics and agriculture – are concerned they might be next, as are countless self-employed businesses.

The NSW payroll inquiry will report by mid-2025 and the next steps may have national implications.

Small businesses will be watching closely.

6. Mandatory climate-related disclosures

From January 1, 2025, Australia’s biggest companies will be required to make climate-related financial disclosures.

Concerningly from year two (i.e. 2026), any large business that makes disclosures will need to tally its “Scope 3 emissions” – meaning emissions by other businesses in their supply chain.

This means smaller firms will be caught up in the regulatory dragnet by needing to provide time-consuming evidence of their own small-scale activity.

The sleeping giant of disclosure laws is a major concern that needs addressing in 2025.

If policy change does not occur this green-tape will only disadvantage small businesses seeking to trade with big business, an annual exchange currently worth $700bn per year.

Painful reminder

Small business enters 2025 with no signs of a better regulatory roadmap ahead.

These six hotspots are a painful reminder of the regulatory environment is drifting even further away from the everyday practical needs of mum-and-dad businesses.

COSBOA is here to help the small business community navigate many of these challenges.

But we need policymakers around the country to stand up and prioritise red tape reduction in 2025.

Only from that inflection point can we help small business to thrive, grow, and promote the competition, productivity and higher living standards the nation needs.

Luke Achterstraat is chief executive of COSBOA.