users guide to the Best Practice regulation HandBook August 2007 2 USERS GUIDE What are the Government’s requirements?1 What is regulation and why is it important What proposals are covered by to assess its impact? the requirements? t Regulation refers to any ‘rule’ endorsed by t Proposals with regulatory or quasi-regulatory government where there is an expectation of obligations being brought to Cabinet by ministers; compliance. It includes primary and subordinate t Letters with regulatory or quasi-regulatory legislation (legislative or non-legislative instruments) obligations being referred to the Prime Minister and quasi-regulation. by ministers for approval; t Regulation is an essential part of running a well- t Proposals with regulatory or quasi-regulatory functioning economy and society, but must be obligations of ministers, boards, statutory carefully designed so as not to have unintended or authorities and regulators; and distortionary effects, such as restricting competition, or imposing unnecessarily onerous costs on those t Treaties. affected by the regulations. Assessing the impact of regulation, including analysing the costs and Do the requirements apply to my benefits, is therefore important to ensure that it department or agency? delivers the intended objective without unduly causing adverse effects. t The requirements apply to all government ministers, departments, agencies, boards and statutory authorities and regulators. To improve the quality of regulation, the Government has decided that: What is the purpose of this Users Guide? t All regulatory proposals are required to undergo a preliminary assessment to establish whether they are t This Users Guide provides an overview of the likely to involve an impact on business and individuals initial steps you should follow to comply with or the economy. the requirements. t If there are likely to be medium business compliance costs, a quantitative assessment of the compliance What is the purpose of the Best Practice costs should be prepared using the Business Cost Regulation Handbook? Calculator (BCC) or an approved equivalent. t The Handbook details the Government’s best t If the proposal is likely to have a significant impact practice regulation requirements and contains on business and individuals or the economy, advice on how to comply with them. more detailed analysis should be undertaken and documented in a Regulation Impact Statement (RIS). If the impacts include medium or significant compliance costs, quantification of compliance costs forms part of the RIS. 1 Note: These guidelines apply to the development of regulatory proposals of the Australian Government. Proposals of ministerial councils, their committees and national standard-setting bodies are subject to the Council of Australian Governments (COAG) Principles and Guidelines for National Standard Setting and Regulatory Action by Ministerial Councils and Standard-Setting Bodies, which is available at www.obpr.gov.au. USERS GUIDE 3 Getting started 1 1. These procedures and processes are mandatory and apply to all government entities that review or make regulations that have an impact on business and individuals or the economy. 2. A preliminary assessment form is available from the OBPR website. 3. Record the reasons why you decided there are likely to be no/low impacts and report these to your Best Practice Regulation Coordinator. 4 USERS GUIDE What are the key steps to follow? Step 1 Analyse the problem Other impacts on business and individuals Once you have examined the problem and established or the economy a case for government action, you should consider You should also identify any other impacts (costs and all feasible options (non-regulatory and regulatory) benefits) on business and individuals or the economy. to achieve the Government’s objectives (see section 6.3 These impacts may be positive or negative, financial or of the Handbook). non-financial, direct or indirect, or market or non-market. t If only non-regulatory options are considered, Impacts should be viewed from a community-wide no further regulatory analysis is required. perspective, taking into consideration their scope t If a regulatory option is considered, go to step 2. (number of businesses and individuals affected) and scale (size of the costs and/or benefits to a business Step 2 Undertake a preliminary or individual). assessment You should be particularly aware of the competition impacts of your proposal, as a RIS may be required for Having considered a regulatory option, you should any proposal that promotes or restricts competition. undertake a preliminary assessment of the likely Such impacts may include promoting or restricting business compliance costs and other impacts on market entry or changes to price, output or business and individuals or the economy. For more production methods. information about the preliminary assessment requirements, see section 3.1 of the Handbook. The checklist in box 2 of this Users Guide (also in the A preliminary assessment form is available from preliminary assessment form) will help in identifying the OBPR website (www.obpr.gov.au) to assist in these types of impacts on business and individuals or completing this assessment. the economy. You should contact the OBPR if impacts on business Compliance costs and individuals or the economy are more than low, You are required to identify whether your proposal will or if you are unsure (see step 3). impose compliance costs on business. The checklist in box 1 of this Users Guide (also in the preliminary Self-assessment assessment form) will assist with this. If your proposal Where you have determined that your proposal will will impose no compliance costs on business, you have no/low business compliance costs and no/low should proceed to a consideration of other impacts other impacts on business and individuals or the (see below). economy, you may self-assess that no further analysis If your proposal will impose any compliance costs, is required. you need to consider whether these are low. In When self-assessing, you should provide a copy of the general, compliance costs will be low where only a few preliminary assessment to your Best Practice Regulation businesses are affected and the costs are negligible or Coordinator, and include a brief description of the trivial. Stakeholders should be consulted at this early proposal and your reasons for believing that there will stage. If the compliance costs associated with your be no/low compliance costs and no/low other impacts. proposal are low, you should proceed to a consideration of other impacts (see below). If the compliance costs If a proposal is self-assessed as having no/low impacts are not low, or if you are unsure, you should contact the when in fact the impacts will be more significant, OBPR (see step 3). the department or agency will be assessed as being non-compliant with the Government’s best practice requirements. For these reasons, you should contact the OBPR if you are unsure about the potential impact of a proposal. USERS GUIDE 5 Frequently asked questions Step 3 Consult with the OBPR to Do I need to undertake a preliminary determine appropriate level assessment? of analysis If regulation is being considered as an option to address a perceived policy problem, you must assess whether You should contact the OBPR when the potential a regulatory proposal will have a potential impact impacts of your regulatory proposal will be more than on business and individuals or the economy, and low, or where you are uncertain. whether further analysis may be required. The OBPR The OBPR will work with you to gain an understanding has developed a preliminary assessment form to guide of the proposal. The OBPR will then advise that: you through the compliance cost impacts and other t the proposal is likely to have no/low impacts and impacts of your proposal. no further analysis is required; t the proposal is likely to have medium compliance My proposal has compliance costs, but costs and a quantitative assessment of how do I know if they are low? compliance costs should be prepared using the In general, compliance costs are low when only a few BCC or an approved equivalent; or businesses are affected and the costs are negligible or t the proposal is likely to have significant impacts trivial. For example: and a Regulation Impact Statement should be prepared, which may be required to include - changes to regulation that are machinery in nature, a quantitative assessment of business involving technical changes that will not have an compliance costs. appreciable impact on business and are consistent with existing policy (such as indexation); or - there would be a very small initial one-off cost to business and no ongoing costs. Who can help? The Office of Best Practice Regulation (OBPR) provides advice, training and assistance on regulatory impact analysis (including using the BCC and preparing RISs) to help policy officers meet the Government’s requirements. Office of Best Practice Regulation 15 Moore Street Phone: +61 2 6240 3290 GPO Box 1428 Fax: +61 2 6240 3355 Canberra City ACT 2601 Email: firstname.lastname@example.org Website: www.obpr.gov.au 6 USERS GUIDE Frequently asked questions…cont’d What is meant by ‘other impacts Who signs off on the preliminary on business and individuals or the assessment? economy’? The preliminary assessment form should be signed by ‘Other impacts’ capture the range of impacts a the officer who has responsibility for signing off on the regulatory proposal may have on business and proposal on behalf of the department or agency. individuals or the economy that may not be classified as ‘compliance costs on business’. These impacts may be Do I need to quantify compliance positive or negative, financial or non-financial, direct or costs? indirect, or market or non-market impacts. If there are likely to be medium business compliance costs, you are required to prepare a full compliance What should I do if the impacts of my cost assessment using the BCC or an approved proposal are no/low? equivalent. The OBPR will advise you if this is the Policy officers should provide a description of the case (when you contact them after completing the proposal and record their reasons for considering that preliminary assessment). Where there are likely to be there will be no/low compliance costs on business and significant compliance costs, the quantification of no/low other impacts on business and individuals or the these costs will form part of the RIS. economy. A copy of this document should be provided to the department or agency’s Best Practice Regulation Do I need to prepare a Regulation Coordinator. The preliminary assessment form (available Impact Statement? from www.obpr.gov.au) may assist with this process. If there are likely to be significant impacts on business and individuals or the economy, you will If I assess a proposal as having be required to prepare a RIS. Where a RIS is required, no/low impact (and do not perform the quantification of compliance costs forms part of any further analysis) what are the the RIS requirements. The OBPR will advise you if this consequences if the OBPR disagrees is the case (when you contact them after you have with my assessment? completed the preliminary assessment). If you assess that a proposal has no/low impacts on business and individuals or the economy and the When do I need to consult with impacts are in fact more significant, your department stakeholders? or agency may be found to be non-compliant with the Effective consultation should occur at all stages of Government’s regulatory impact analysis requirements. the regulatory cycle. In such cases, the proposal should not proceed to the Consultation early in the regulatory process will decision maker unless exceptional circumstances have assist in identifying the nature and extent of the been granted by the Prime Minister. If you are unsure problem, the range of possible options for addressing as to whether there are no/low impacts, or whether it, and potential costs to consider. any further analysis is required, you should consult the OBPR. The whole-of-government policy on consultation establishes the principles for best practice consultation with stakeholders as part of good regulatory process. USERS GUIDE 7 Box 1 Business Compliance Cost Checklist As part of a regulatory impact analysis, a practical approach for considering the impacts on business compliance costs potentially flowing from regulatory proposals is through a set of threshold questions (a compliance cost checklist). Would the regulatory proposal involve one of the following compliance tasks? Notification Will businesses incur costs when they are required to report certain events? - For example, businesses may be required to notify a public authority before they are permitted to sell food. Education Will costs be incurred by business in keeping abreast of regulatory requirements? - For example, businesses may be required to obtain the details of new legislation and communicate the new requirements to staff. Permission Are costs incurred in seeking permission to conduct an activity? - For example, businesses may be required to conduct a police check before legally being able to employ staff. Purchase cost Are businesses required to purchase materials or equipment? - For example, businesses may be required to have a fire extinguisher on-site. Record keeping Are businesses required to keep records up to date? - For example, businesses may be required to keep records of accidents that occur at the workplace. Enforcement Will businesses incur costs when cooperating with audits or inspections? - For example, businesses may have to bear the costs of supervising government inspectors on-site during checks of compliance with non-smoking laws. Publication and documentation Will businesses incur costs when producing documents for third parties? - For example, businesses may be required to display warning signs around dangerous equipment, or to display a sign at the entrance to home-based business premises. Procedural Will businesses incur non-administrative costs? - For example, businesses may be required to conduct a fire safety drill several times a year. Other Are there any other business compliance costs (including indirect costs or impacts on intermediaries such as accountants, lawyers, banks or financial advisers) associated with the regulatory proposal? 8 USERS GUIDE Box 2 ‘Other impacts’ Checklist The following checklist will help you to assess whether a proposal has a potential impact on business and individuals or the economy. Will the proposal: Potentially affect the number and range of businesses in an industry? For example: - change the ability of businesses to provide a good or service; - change the requirements for a licence, permit or authorisation process as a condition of operation; - affect the ability of some types of firms to participate in public procurement; - significantly alter costs of entry to or exit from an industry; or - change geographic barriers for businesses. Potentially change the ability of businesses to compete? For example: - control or substantially influence the price at which a good or service is sold; - alter the ability of businesses to advertise or market their products; - ban certain types of products or business practices; - set significantly different standards for product/service quality; or - significantly alter the competitiveness of some industry sectors. Potentially alter the incentives for business to compete? For example: - create a self-regulatory or co-regulatory regime; - impact on the mobility of customers between businesses; - require/encourage the publishing of data on company outputs/price, sales/cost; or - exempt an activity from general competition law. Potentially impact on consumers? For example: - alter the choices available to consumers; - affect the quality of consumer products or services; - create or remove restrictions on access to a product; - promote or restrict information dissemination to consumers; or - add to or reduce the complexity of consumer products or services. Potentially have any other impacts on business and individuals or the economy? For example: - mandate payments from one party to another (excluding taxes); - have environmental or social impacts (including distribution of resources); - create or amend government cost recovery arrangements; - impact on Australia’s international capital flows or trade; - impact on mobility of labour; - impact on resource allocation, saving or investment; - transfer risk between business, individuals and government; or - impose any other financial costs.
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