What is Legal Compliance for Australian Businesses?

Australian businesses are subject to a wide range of laws, licences and regulatory bodies. Complying with these regulations can be a challenge, but it’s an important part of operating a business.

Meeting your compliance requirements can minimise risk, improve efficiency and employee retention, and ensure you stay ahead of the competition.

In this article, we discuss Australia’s compliance requirements and how you can set your business up for success.

What is Legal Compliance?

Compliance is the process of ensuring your company adheres to the relevant rules, policies and procedures in your jurisdiction and industry. There are two major components to compliance for Australian businesses:

1. Complying with the laws and regulations that govern your industry and geographic location.
2. Implementing internal systems that ensure your employees are following the relevant laws and standards for your industry.

Compliance varies from one business to another. The exact requirements are dependent on your location, industry, business structure and more. We recommend speaking to an adviser if you’re unsure of your obligations.

How to Ensure You’re Meeting Compliance Requirements

1. Understand Your Obligations

Make sure you understand the compliance requirements that relate to your industry and jurisdiction. These may govern things like:

• Licences
• Data handling and protection
• Work health and safety
• Environmental and emissions responsibilities
• Accounting and record keeping responsibilities
• Tax law
• Employment law
• Consumer rights

In addition to the requirements for your company, you have certain responsibilities as the Director. These require you to act in good faith and in the best interests of the company, but other responsibilities apply.

See our list of key regulatory bodies below for more information.

2. Set Up Your Company Correctly

The way you set up your company has a direct impact on reporting and record keeping requirements, taxation, investment and the registrations you’re required to hold. There are several main types of business structure in Australia:

• Sole tradership – Sole traders are individuals operating a business on their own behalf. Business income is reported and taxed as personal income, so compliance requirements are low.
• Partnership – Two or more people can operate a business as a Partnership. Partnerships are inexpensive to set up and maintain, and they have minimal reporting requirements.
• Company – Your business can be established as a Private or Public company. These structures are separate legal entities that are owned by shareholders. This reduces your personal risk, but comes with additional governance requirements.
• Trust – A business can be established within a trust. Trusts provide benefits for taxation and income distribution, but they have specific governance and reporting requirements that don’t apply to traditional company structures.

3. Develop a Compliance Program

Your compliance program is the internal policies and documentation that ensure you’re meeting compliance requirements. These processes assist you with identifying issues, meeting requirements and remedying breaches.

An effective compliance program may include:

• Written policies and procedures for standards of conduct
• Having a dedicated compliance officer
• Conducting ongoing training and education for employees
• Developing a compliance reporting procedure
• Conducting audits and monitoring for compliance breaches
• Enforcing standards and taking disciplinary action against anyone who breaches policies and requirements
• Responding to any problems that are identified

The Australian Government provides compliance program templates that can help you get started.

4. Train Your Employees

Employees are a key component of the compliance puzzle. All employees should receive training so that they understand what’s expected of them. This training may cover things like ethics, decision making, record keeping and the process for reporting compliance issues.

5. Maintain Detailed Records

Record keeping is one of the most important parts of compliance. Australian businesses are required to keep detailed records about their finances, taxes, employees and registration.

Businesses must keep financial, taxation and superannuation records for a minimum of 5 years. You may be required to present this information to the ATO or another regulatory body. If you don’t have the records, or if the records are incorrect, you can face fines and other penalties.

Keeping financial records is crucial if your business begins to struggle. Your financial records will be investigated during formal processes like Small Business Restructuring and Administration. Having complete and accurate records is the best way to resolve financial difficulties.

6. Ongoing Compliance Requirements

Compliance is closely linked to company culture. Once you’ve instituted proper procedures and documentation, you’ll need to regularly review compliance and monitor any issues that arise.

Your compliance audits should include:

• A review of the relevant laws, regulations, licences and standards
• Ensuring automatic filings and record keeping are happening as intended
• Auditing records for accuracy and to ensure you’re up to date on your business’ financial position
• Checking that outstanding compliance issues have been handled correctly
• Providing regular compliance training to employees
• Updating policies to ensure they’re relevant and effective

Key Regulatory Bodies in Australia

Compliance requirements are administered by local, state and federal government agencies, as well as industry bodies. Here are some of the key regulatory bodies in Australia:

• Australian Securities & Investments Commission (ASIC)
• Australian Competition & Consumer Commission (ACCC)
• Australian Taxation Office (ATO)
• State Revenue Offices QLD | NSW | VIC | ACT | SA | NT | WA | TAS
• Office of the Australian Information Commissioner (OAIC)
• Australian Securities Exchange (ASX)

ASIC maintains a comprehensive list of regulators that may apply to your business.

Your company also needs to comply with industry-specific regulations. If you’re unsure where to start with compliance, the Australian Business Licence and Information Service can help you find the licences your organisation needs.

Consequences for Non-Compliance

Non-compliance is a serious matter in Australia. Depending on the offence, penalties can include:

• Restrictions on your ability to act as a company Director
• Monetary fines
• Personal liability for company debts
• Imprisonment

The penalties vary widely. While imprisonment is uncommon, work restrictions, fines and personal liability are a real possibility.

Speak to the Team at Business Savers

Maintaining financial records is one of your biggest responsibilities as a company Director. If you ever find yourself in financial trouble, these records can keep the company above water.

Business Savers is a team of advisers and Registered Administrators. We have vast experience in dealing with personal and corporate insolvency. We understand the value of compliance, and work with our clients to put effective policies in place.

Contact us for a confidential discussion if you are concerned about your business’ finances.