The Cabinet Handbook requires that legislative proposals submitted to Cabinet include advice on the outcome of legislative review and a statement on the legislative and regulatory impacts.

Agencies responsible for preparing legislative proposals should review the policy to assess whether the proposed legislation will restrict competition or impose a significant negative impact on business.

If the proposal does not include a competition restriction or significant business impact, details are provided below on what needs to be included in the Cabinet Minute. Any proposed legislation which will restrict competition or impose a significant negative impact on business is required to be accompanied by a Regulatory Impact Statement, detailing how the proposed legislation is consistent with the guiding principle.

Further advice on the preparation of a RIS is provided below.​

The agency responsible for preparing a Cabinet Minute seeking approval to draft legislation must determine whether the legislation will:

1. restrict competition in any way; or
   
2. impose a significant negative impact on business.
   

If a legislative proposal will restrict competition in some way or impose a significant negative impact on business, the responsible agency is required to provide evidence that the benefits to the community as a whole outweigh the costs and that the objectives of the legislation can only be achieved by restricting competition or imposing a significant impact on business. This evidence is provided in the form of a Regulatory Impact Statement.

Legislation which does not restrict competition or impose a significant negative impact on business does not require a Regulatory Impact Statement.

Guidance on factors to take into consideration when determining whether proposed legislation will meet the competition test or business impact test is provided in the “Assessing Competition Restrictions and Business Impacts" section below.

Important note: It is not a sufficient argument to simply state that the intended benefits of a proposed policy demonstrate that there is no competition restriction or significant impact. Justifying a competition restriction or an impact on business is the purpose of the public benefit analysis in a Regulatory Impact Statement. ​​​​

If the proposal will not include a restriction on competition or impose a significant negative impact on business, the following statements should be included in the Cabinet Minute.

On the cover page of the Cabinet Minute, against the heading “Outcome of Legislative Review":

The proposed legislation will not restrict competition in any way or impose a significant negative impact on business.

In the Annexe Statements at paragraph 6.4.3 of the Cabinet Minute:

The Department of [XYZ] has reviewed the proposal outlined in this Minute and considers that the proposed legislation will not restrict competition in any way or impose a significant negative impact on business.

If the proposal will restrict competition in some way or impose a significant negative impact on business, evidence must be provided that the benefits to the community as a whole outweigh the costs and that the objectives of the legislation can only be achieved by restricting competition or imposing a significant impact on business. This is achieved by preparing a draft Regulatory Impact Statement.

If the draft RIS is prepared prior to obtaining Cabinet approval for the legislative proposal, the following statements should be included in the Cabinet Minute with the draft RIS attached to the Minute:

On the cover page of the Cabinet Minute, against the heading “Outcome of Legislative Review":

The proposed legislation will restrict competition and/or impose a significant negative impact on business. Subject to public consultation, the benefits of the restriction/impact to the community as a whole appear to outweigh the costs and the objectives of the proposed legislation can only be achieved by restricting competition or imposing a significant impact on business.

In the Annexe Statements at paragraph 6.4.3 of the Cabinet Minute:

The Department of [XYZ] has reviewed the proposal outlined in this Minute and assessed that the proposed legislation will restrict competition and/or impose a significant negative impact on business.

A draft RIS has been prepared in accordance with the requirements of the Legislation Review Program, demonstrating that the benefits to the community as a whole outweigh the costs, the objectives of the proposed legislation can only be achieved by restricting competition and/or imposing a significant negative impact on business and the restrictions/impacts are warranted in the public benefit.

The following restrictions can have an adverse impact on competition. If any of these competition restrictions are observed in a policy proposal, a RIS should be prepared.

1.    Restrictions on Market Entry

Market entry relates to the processes that an individual or firm needs to undertake to begin trading in a particular market.  In most instances there will be commercial barriers to market entry, such as the purchase of suitable plant and equipment, but in many cases there are also legislative barriers. These legislative barriers can include:

• an outright prohibition in regard to a particular business activity;
• a statutory monopoly for a business;
• licensing or registration requirements for persons or bodies wishing to engage in a particular business activity;
• the allocation of quantitative entitlements, quotas or franchises among participants in particular business activities; or
• the allocation of licences or other authorities that allow the holder access to natural resources (including water, minerals, forests and fisheries) or which create rights, or permit specified activities.

Legislation which restricts the entry of new competitors in a market is not justified by an absence of existing competitors. The threat of new competition provides an incentive for existing firms to price goods and service competitively, which benefits consumers.

2.    Restrictions on Competitive Conduct

Legislation can restrict competitive conduct by firms by restricting ordinarily acceptable forms of competitive behaviour.  Such restrictions can include:

• price controls in relation to goods or services;
  
• hours of operation;
• size of premises;
• the provision of specified facilities or the use of specific equipment;
• the geographical area of operation;
• permissible advertising;
• business ownership; or
• the type of good or service that can be offered for sale.

3.    Restrictions on Product or Service Innovation

​Legislation can restrict competition by regulating the quality or standard of a product or service, thereby reducing the scope for innovation.  Such restrictions can include the requirement for prescribed quality or technical standards to be observed in the production or packaging of a good or the delivery of a service, other than those requirements that apply generally in relation to public or workplace health and safety.

4.    Restrictions on the Entry of Goods or Services

Legislation can restrict the entry of goods and services from interstate or overseas, giving a competitive advantage to local producers.  Such restrictions often relate to quarantine matters.  However, in some cases the restrictions have no scientific basis and serve to protect existing businesses from interstate and overseas competition.

5.    Administrative Discretion

​Legislation can also restrict competition by providing for administrative discretion, which can include:

• the favouring of incumbent suppliers;
• preferential purchasing arrangements;
• making financial assistance (such as direct grants or subsidies or the waiver of various State or Local Government taxes or charges) available if a business is carried on in a certain location;
• treating public and private sector providers differently; or
• setting technical specifications that are only available from a single supplier.

It is necessary to clearly identify and describe all specific legislative restrictions on competition within the legislation under assessment. 

Impacts on business could include the imposition of additional costs, burdens or disadvantage.

Whether an impact is “significant" will depend on a business's ability to adapt to regulatory change. Several factors may influence this, such as their size, scale, market share and available resources. An assessment of the cost of an impact relative to a business's turnover could be one approach, as would an assessment of capacity and willingness to pay or incur an additional cost.

Significant impacts are likely to be those that effect multiple parties, have unequal impacts, are new or unique, create clear groups of winners and losers, impose additional costs, or are controversial.

A useful point of reference is to consider whether the person responsible for the business which will be affected by the proposed legislation would consider the impact on the business to be significant, in their circumstances. If the answer to this is yes, then the significance threshold is met. If the answer is no, and this can be supported by evidence, then the significance threshold is not met. If the question cannot be answered, then consultation with potentially impacted businesses would be appropriate.

If the proposed legislation restricts competition in any way or imposes a significant negative impact on business, a RIS should be prepared and appropriate public consultation undertaken. The RIS will inform the public and stakeholders and will assist those with an interest in the legislative proposal to make an informed submission or comment.  A potential structure of an RIS is provided below.

The RIS should:

• explain the objectives of the legislation, the issues surrounding the restriction on competition or business impact, and the benefits and costs which flow from the restriction or impact, including to specified stakeholders (where relevant); and
• clearly identify whether the benefits of the restriction on competition or business impact outweigh the costs.

This will require an assessment of the direct and indirect social, economic and environmental costs of the proposed legislation. All costs and benefits must be identified and quantified where possible, using appropriate analytical techniques. These techniques include cost-benefit analysis, risk analysis and cost-effectiveness analysis. 

If some costs or benefits cannot be quantified, the effect of the restriction on competition or business impact must be presented in a way that enables a comparison of the costs and benefits. The comparison of costs and benefits should also extend to alternative approaches, including non-regulatory approaches, which may achieve the policy objective of the proposed legislation.

Where a RIS is prepared, it should be published with the proposed legislation for public consultation.

Feedback or submissions received during consultation may be used to revise the RIS and inform the further development of the legislation to address any significant issues raised. Once the legislation has been finalised, the RIS should be attached to the Final Bill Briefing and include a summary of feedback received during consultation and whether suggested amendments from this process have been incorporated in the final Bill.

It should be noted that a RIS is not required: 

1. in the case of taxation legislation, however it is still important that taxation legislation does not provide a competitive advantage or disadvantage to some competitors over others in a market; or
2. where Tasmanian primary legislation is developed or amended to implement national reforms that have already been the subject of a RIS at the national level.

​In these cases, the Cabinet Minute should reflect the reason why a RIS has not been prepared.​

​​​The following guidance provides a suggested format and structure for the preparation of a RIS.

Objectives of the Legislation

Include a clear statement of the objectives of the legislation and the reasons for them.  In particular, detail the objectives to be achieved by the restriction on competition or impact on business.  Care must be taken not to confuse the objectives of the legislation with the strategies for achieving the objectives.

The objectives should:

• ​be reasonable and appropriate; and
• not be inconsistent with the objective of other Acts, subordinate legislation and stated Government policies.

Nature of the Restriction on Competition

Clearly identify the nature of the legislative restrictions on competition.  Governments, through legislation, intervene in markets for many reasons and in many ways.  The RIS assessment should primarily be concerned with the restrictions which impact most directly on competition. 

Specific restrictions on competition are explained more fully in the “Assessing competition restrictions" section above.

Impact on Business

Include an assessment of whether the legislation will have a significant impact on business (other than that impact caused by any restriction on competition) and the costs and benefits involved. 

Include a summary of the dollar costs and benefits of the impact on business and each of the identified options.  In particular, there will need to be a full discussion of those impacts that are not able to be quantified in dollar terms.

Costs and Benefits of the Restriction on Competition

Include an assessment of whether the legislation will have a significant impact on competition and, if so, an evaluation of whether the benefits of the restriction outweigh the likely costs.  If the benefits outweigh the likely costs, this section should include an evaluation of whether the restriction represents the absolute minimum in the public benefit. 

Include a summary of the dollar costs and benefits of the restriction on competition and each of the identified options.  There will also need to be a discussion of the impacts that are not able to be quantified in dollar terms.

Alternative Options

Identify all alternative options which would also achieve the desired objectives, either wholly or substantially, including the option of removing the legislative restriction on competition or impact on business or not proceeding with the proposed legislation.  If a legislative approach is recommended, provide an explanation of why this is the most efficient means of achieving the objectives. Also consider whether the existing or proposed restrictions are the absolute minimum necessary in the public interest.

Greatest Net Benefit / Least Net Cost Alternative

Include an assessment of which of the alternative options involves the greatest net benefit or least net cost to the community. This may involve a comparison of the restriction on competition and its alternatives.

Statement of Consultation Process

Provide details of the public consultation process undertaken.

Note:

In preparing a RIS, it should be noted that:

1. ​where costs and benefits are referred to, economic, social and environmental costs and benefits, both direct and indirect, are to be taken into account and given due consideration; and
2. costs and benefits must, where possible, be quantified.  If this is not possible, the anticipated impacts of the action and of each alternative must be stated and presented in a way that permits a comparison of the costs and benefits.​
   

The public benefit test is part of the cost-benefit analysis that is fundamental to a RIS. The following list of issues, while not exhaustive, can be used to assist in determining whether a legislative restriction on competition is in the public benefit. That is, whether the benefits of the restriction outweigh the costs.​

Does the restriction:

• promote competition in an industry;
• assist economic development (for example, in natural resources through the encouragement of exploration, research and capital investment);
• foster business efficiency;
• encourage industry rationalisation;
• expand employment or prevent unemployment;
• foster industry harmony;
• assist efficiency in small business (for example, by providing guidance on costing and pricing or marketing initiatives which promote competitiveness);
• improve the quality and safety of goods and services and expand consumer choice;
• supply better information to consumers and business;
• promote equitable dealings in the market;
• promote industry cost savings, resulting in contained or lower prices at all levels of the supply chain;
• encourage the development of import replacements;
• encourage growth in export markets;
• implement desirable community standards with the minimum impact on competition in the marketplace; or
• take essential steps to protect the environment.
  

Treasury approval or certification is not required prior to a proposal being submitted to Cabinet.

Where a RIS is required, it is the responsibility of the relevant agency to ensure that the RIS meets the requirements of the LRP and contains sufficiently rigorous analysis to inform interested stakeholders and the public.

Treasury is available to provide advice and assistance in relation to the preparation of a RIS and will review and provide feedback on drafts if requested. Agencies are encouraged to contact the Economic Policy Branch early in the policy development process to enable the Branch to provide greater assistance.

As a part of normal Cabinet processes, Treasury will be requested to provide a Cabinet Advisory in relation to legislative proposals by agencies. Treasury provides advice on the economic, regulatory, intergovernmental and financial implications of the proposed legislation. If Treasury has any concerns about an agency's determination of the competition and business impact tests in relation to a legislative proposal or the adequacy of a RIS and/or consultation plan, a comment to explain this concern may be included in the Advisory. 

If a RIS has been prepared, a copy should be attached to the Final Bill Briefing, with a summary of feedback received during consultation and whether feedback resulted in any adjustment to the final version of the legislation.

If the final draft legislation does not restrict competition or impose a significant negative impact on business, a statement to this effect should be included in the Final Bill Briefing. For example:

The Department of [XYZ] has assessed that the final Bill will not restrict competition or impose a significant negative impact on business.

Yes.

Where the restriction or impact is major, a detailed assessment of the costs and benefits is required to establish whether the restriction or impact is in the public benefit. The RIS will form the basis of public consultation and should assist those with an interest in the legislative proposal to make informed comment.

As a guide, the consultation period should range between a minimum of 3 weeks and a maximum of 6 weeks, although additional time may be needed depending on the complexity of the issue. ​​

The Economic Policy Branch of Treasury is available to provide advice and support for agencies assessing legislative proposals under the LRP.

Email: economic.reform@tas.gov.au

Regulatory impact analysis is considered an effective method of identifying and assessing a range of policy options and ensuring that the benefits of the policy outweigh the costs. It is most effective when undertaken at the start of the policy process.

For these reasons, Treasury is keen to provide advice and support early in the policy development process.

Treasury is available to review and provide feedback on draft Regulatory Impact Statements as required.​