Australian hospitality businesses are being penalised for compliance failures at an alarming rate, with 63% reporting they have been sanctioned in the past four years—the second-highest rate across all industry sectors, according to a new national survey.
The finding is part of the 2025 Small Business Conditions Report released by the Australian Chamber of Commerce and Industry, which surveyed more than 1,100 small businesses across Australia.
Only the financial and insurance services sector reported a higher penalty rate at 74%, while the accommodation and food services industry significantly outpaced the overall small business average of 48%.
The penalties—which include fines, penalty interest, and other sanctions—reflect what the report describes as mounting compliance pressures on an already-strained sector.
The hospitality industry also recorded the lowest business confidence of any sector surveyed, with just 75% of accommodation and food services operators expressing confidence in their business future, compared to 94% in manufacturing and financial services.
Compliance burden escalates with business size
The likelihood of receiving a penalty increases sharply with business size. Among businesses with 10-14 employees, 45% had been penalised. For those with 15-24 employees, the figure jumps to 66%.
Among sole traders, just 22% reported penalties, rising to 35% for businesses with 2-9 employees.
Nearly half (48%) of all small businesses reported being penalised in the past four years, suggesting the hospitality sector’s 63% rate represents a significant compliance risk compared to other industries.
Cost and time pressures mount
The compliance burden extends beyond penalties. 61% of all small businesses reported spending more than $20,000 annually on compliance-related expenses. For businesses with 20-24 employees, 57% spend more than $50,000 per year.
77% of businesses manage compliance internally, rising to 85% among businesses with 20 to 24 employees. This means owners or senior managers personally devote significant time to ensuring compliance.
39% of respondents spend more than six hours per week navigating red tape. Among larger small businesses (15-24 employees), this rises significantly, with 58-63% devoting over six hours weekly.
Top compliance pain points
Taxation remains one of the most challenging areas, cited by 28% of respondents. Other difficult compliance areas include licenses, permits and renewals (22%), environmental requirements (22%), and broad HR issues (20%).
Nearly half of respondents (42%) noted difficulties understanding termination and unfair dismissal rules.
Other common pain points included: struggling to understand compliance, casual employment and conversion obligations (37%), understanding modern award classifications (36%), lacking the time and resources needed to maintain compliance (35%), understanding superannuation requirements (34%) and maintaining compliance with payslip requirements (33%).
Industry faces additional pressures
The compliance challenges come as hospitality operators also grapple with workforce shortages, rising costs, and mental health pressures.
28% of all small businesses disclosed that they had seriously considered shutting down in the past year, and 31% indicated that they were either already in the process of closing or contemplating closure in the coming 12 months.
The Australian Chamber of Commerce and Industry called for urgent policy action to simplify the regulatory landscape and reduce risk exposure for small businesses attempting to comply with increasingly complex requirements.
