While businesses experiencing either declining or stable growth (67%) and those in a growth phase (60%) report the superannuation guarantee as their primary regulatory trouble, this issue tops even new labour laws and intensified Australian Taxation Office (ATO) enforcement activities, according to the latest figures from ScotPac’s 10th annual SME Growth Index Report.

The superannuation guarantee represents the minimum contribution that employers must make to their employees' retirement funds. Since 2021, this rate has been increasing incrementally, and it currently stands at 11%. Future planned increases will push this rate to 11.5% in July 2024 and 12% in July 2025, in accordance with revisions to the Superannuation Guarantee Act.

This ongoing rise in super contributions is hitting SMEs particularly hard. Jon Sutton, CEO of ScotPac, highlighted the specific vulnerabilities of SMEs, emphasizing that the current economic landscape makes them especially sensitive to cash flow disruptions and the administrative burdens imposed by new regulations.

“Unlike larger companies with dedicated compliance teams, SMEs often lack the resources to easily adapt to these regulatory changes, which significantly impacts their ability to manage cash flow and rework budgets,” Sutton noted.

Beyond the superannuation guarantee, other notable regulatory challenges identified by SMEs include:

  • Employment laws and regulations (58% of respondents)
  • Company tax and ATO collection activities (51%)
  • Complexities in BAS (43%)
  • Management of payroll tax rates (39%)

The scope of this impact is broad, affecting the vast majority of Australia’s business landscape. Australian Bureau of Statistics data indicates that approximately 97.3% of businesses (around 2.5 million entities) are small businesses, employing fewer than 20 people, while medium-sized businesses (20-199 employees) make up about 2.5% (64,559 entities).

Taking an in-depth look into the annual SME Growth Index Report, which was conducted by East & Partners for ScotPac, it becomes clear that these challenges are wide-reaching. The study involved interviews with over 700 SMEs, each generating annual revenues between A$1-20 million, offering a comprehensive overview of the regulatory pressure points faced by today's smaller businesses.