REGULATORS must make more effort to understand how regulation impacts small business.
Research the Productivity Commission has found small firms feel the burden of regulation more than larger businesses because a lack of staff, time and resources means they don't always understand and fulfil their obligations.
"A regulator's culture and attitude towards business can be as important as the content of the regulation itself," Commissioner Warren Mundy said in a statement on Wednesday.
"There is still significant scope for improvement in the way regulators engage with small business."
The report proposes a suite of changes which need to be implemented by all levels of government.
These include adopting communication practices with small business that focus on "brevity, clarity and accessibility of information".
Regulators should also be resourced to do their job effectively to avoid the shifting of direct and indirect costs onto business.
The commission found that regulators with effective risk-based engagement policies and procedures were more likely to be better resourced and to have senior leadership that invests in, and fosters, a business-focused culture among their staff.
"A stronger focus on risk was found to limit unnecessary intrusion on lower-risk small businesses, free up resources to improve frontline guidance and advice services, and enable them to more effectively address higher risks to communities," it says.
Government should require regulators to report back against a set of engagement principles to insure continuous improvement in regulatory performance.