Australia’s $3 Million Privacy Exemption Is Gone: What You Must Do Now

If you run a small or medium business in Australia, this change affects you. The long-standing $3 million turnover exemption from the Privacy Act has been removed. That means almost every business must now comply with federal privacy law, no matter its size.

This is not an abstract policy shift. It is a direct risk to your balance sheet, your reputation, and your customer trust.

What Changed

For over twenty years, most smaller businesses were excluded from the Privacy Act. That era is over. The government has strengthened the law, giving the privacy regulator sharper powers and introducing direct rights for individuals to sue.

In short: the cost of getting privacy wrong just skyrocketed.

The Three New Risks

• You can be sued directly. People can now take legal action for serious invasions of privacy and seek damages for emotional harm.

• Fines are huge. The regulator can impose penalties up to fifty million dollars or thirty per cent of turnover. Even minor failures such as unclear consent or a missing unsubscribe link can trigger penalties.

• Security duties are tougher. The law now requires both technical and organisational safeguards. Encrypt data, control staff access, and train everyone. Having a firewall alone will not save you.

Who Will Feel It Most

• Online retailers that collect customer and payment details.

• Health and wellness providers that store sensitive information.

• Tech startups that use artificial intelligence or automation in their products.

If you handle personal data, you are in the spotlight.

What You Should Do Right Now

1. Update your privacy policy. Make it plain, specific, and honest about what data you collect, how you store it, and who you share it with.

2. Train your team. Every employee must know how to handle data safely and understand that doxxing is now a criminal offence.

3. Create a breach response plan. Be ready to act within seventy-two hours of a data incident. Fast, clear action can prevent fines and protect your reputation.

The Bottom Line

Treat privacy as seriously as insurance or tax. It is now a basic cost of doing business.

A compliant, transparent privacy framework not only avoids penalties but builds customer trust and positions your business as responsible and modern.

Talk to a privacy lawyer or adviser this week. Compliance is no longer optional, and the businesses that adapt fastest will gain the greatest advantage.

This article provides general information only. Seek professional legal and accounting advice when starting a business or setting up a new business.

Below all details of the changes for nerds.

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The Changing Privacy Landscape in Australia: Implications for SMEs

Australia is undergoing a major overhaul of its privacy laws, bringing its regime closer to stricter global standards. The cornerstone Privacy Act 1988 (Cth) – which contains 13 Australian Privacy Principles (APPs) governing how personal information is collected, used, stored, and disclosed – remains the foundational law. However, recent reforms in 2024–2025 have expanded the Act’s reach and toughened obligations, especially for small and medium enterprises (SMEs). Crucially, the traditional exemption that spared many small businesses from compliance is being removed, meaning almost all businesses will soon be covered regardless of size .

This article examines the key changes in Australia’s privacy landscape, how they affect SMEs (Pty Ltd companies), which types of SMEs are most impacted, and the practical implications – including compliance costs. It also discusses how an experienced lawyer can help navigate these changes and how SMEs might leverage the new rules as a business advantage rather than viewing them purely as a compliance burden.

Key Reforms Affecting SMEs (2024–2025)

Recent privacy reforms introduce sweeping changes that significantly impact SME compliance obligations. The most important developments include:

• Removal of the Small Business Exemption: Under current law, businesses with annual turnover of $3 million or less were generally exempt from the Privacy Act’s requirements (with some exceptions for sensitive activities)  . This exemption is now being phased out, which will make compliance mandatory for nearly all Australian businesses regardless of size  . Government has signalled a transition period and a risk-based approach – smaller companies handling high-risk data (e.g. tech-centric firms or those collecting sensitive personal info) will face the most scrutiny . Once in effect, this change will bring ~95% of Australian businesses (over 2 million SMEs) under the Act’s scope, a dramatic policy shift from the year 2000 when small businesses were exempted to avoid unreasonable compliance costs  .

• New Privacy Tort – Right to Sue for Breaches: A statutory tort for serious invasions of privacy has been enacted, commencing June 2025  . This gives individuals a direct legal right to seek compensation through the courts if a business seriously breaches their privacy. Previously, individuals’ main recourse was to complain to the regulator (OAIC), but now an SME could be sued for damages (including for emotional distress) over egregious privacy invasions  . The tort is a standalone cause of action – meaning it applies even outside the Privacy Act/APP framework . For example, if a company blatantly mishandles highly sensitive data or intentionally intrudes on someone’s privacy, it could face a lawsuit independent of any regulatory action. This greatly increases litigation risk for businesses of all sizes. (Notably, the law prohibits courts from awarding aggravated damages under this tort, but does allow emotional distress damages and even punitive damages in exceptional cases, capped by reference to defamation law limits  .)

• Criminalisation of “Doxxing”: In a world-first move, Australia has made malicious doxxing a criminal offence. “Doxxing”refers to the deliberate release of someone’s personal information online with intent to harass, threaten or harm. The reforms amended the Criminal Code to introduce two new offences: one for releasing personal data in a menacing or harassing way towards an individual, and another for releasing personal data about a group (targeting the group based on attributes like race, religion, sexual orientation, etc.)  . For SMEs, this underscores that improperly sharing personal information can now lead to criminal liability – not only for those directly posting the data, but potentially for companies if their employees engage in such conduct using business systems. All staff should be trained to avoid any reckless or targeted disclosure of someone’s private details that could be seen as threatening  . This offence carries the possibility of imprisonment, signaling how seriously Australia now treats malicious privacy breaches.

• Stronger Enforcement Powers and Higher Penalties: The privacy regulator, the Office of the Australian Information Commissioner (OAIC), has been armed with broader investigative powers and a tiered penalty regime. The OAIC can now conduct assessments and request information about suspected breaches more freely . It can issue infringement notices and “compliance notices” directly for certain Privacy Act violations  – for example, if an SME fails to have a required privacy policy or doesn’t provide an opt-out for marketing, the OAIC can impose fines without a lengthy court process . Crucially, maximum penalties for serious or repeated privacy breaches have increased dramatically. For corporations, fines can reach the greater of AUD $50 million or 30% of annual turnover (or three times any financial benefit gained)  . This means even a medium-sized company could face a crippling fine for a major data breach. Even lower-tier infringements (minor or administrative breaches) carry fines in the tens or hundreds of thousands , and failure to comply with an OAIC notice can itself trigger penalties . In short, privacy non-compliance now comes with teeth – SMEs risk serious financial and reputational damage if they ignore their obligations  .

• Expanded Breach Notification Duties: Australia’s Notifiable Data Breaches scheme has been tightened. Businesses must notify affected individuals and the OAIC of any “eligible” data breach (one likely to cause serious harm) as soon as practicable, and the threshold for notification is under review to be more inclusive of potential harm. While not yet a strict 72-hour rule in law, the OAIC’s guidance expects notification within 72 hours of becoming aware of a significant breach . Failing to promptly report a breach can itself incur penalties under the new regime . Practically, this means SMEs need to have incident response plans ready and drill the procedure for notifying customers and authorities quickly after a cyber incident. (Separately, in the cybersecurity domain, a new Cyber Security Act 2024 mandates that businesses with >$3 million turnover must report any ransomware payments to government within 72 hours   – indicating the broader trend toward rapid transparency around data incidents.)

• New Obligations for Data Handling: The reforms introduce or foreshadow several enhanced duties for organisations:

  • “Technical and Organisational Measures” for Security: The law now explicitly requires businesses to take bothtechnical measures (like encryption, access controls, firewalls) and organisational measures (policies, staff training, oversight) as part of the “reasonable steps” to secure personal information under APP 11 . This aligns with the EU GDPR approach and makes clear that cybersecurity is not just an IT issue but a governance issue. SMEs must document and implement ongoing practices (e.g. regular employee privacy training, written data protection procedures) – it’s no longer enough to assume a firewall alone is sufficient.

  • Stricter Consent and Transparency Requirements: Consent for collecting or using personal data will be defined more tightly in law. It must be voluntary, informed, current, specific, and unambiguous – and cannot be bundled into general terms and conditions. Small businesses will need to ensure any customer sign-up forms or marketing opt-ins meet this standard (clear language, not pre-ticked boxes, etc.). Additionally, privacy policies and collection notices need to be more transparent about personal data practices. For instance, if an organisation uses any form of automated decision-making (AI or algorithms) that significantly affects individuals, the privacy policy must disclose this and explain the nature of that automated decision-making . Likewise, if personal information is sent or stored overseas, the business will have to inform customers and will benefit from forthcoming “whitelisted” jurisdictions (countries deemed to have equivalent privacy protections) to simplify compliance .

  • Privacy Impact Assessments (PIAs) for High-Risk Activities: Before commencing any project or service that involves high-risk handling of personal data (for example, deploying a new system that uses sensitive information or AI profiling), businesses may be required to conduct a Privacy Impact Assessment. A PIA is a formal process to evaluate and mitigate privacy risks. While this may initially apply more to larger entities, SMEs engaging in potentially privacy-intrusive activities (e.g. a healthtech startup using patient data or a marketing firm doing large-scale profiling) should be prepared to perform PIAs and document the outcomes.

  • Children’s Privacy Code: A Children’s Online Privacy Code is being developed and will be in force by late 2026, imposing additional rules for services likely to be accessed by children (under 18). SMEs that run websites, apps, or platforms popular with children (e.g. educational tools, gaming apps, smart toys) will have to comply with this code. Likely requirements include age-appropriate privacy notices, parental consent mechanisms for young children, and stringent default privacy settings  . Even before that code is active, the reforms define a “child” as under 18 and signal higher expectations when handling minors’ data  .

  • Cross-Border Data Transfer Rules: The amendments pave the way for a more structured cross-border data regime. The Australian government can now “whitelist” certain countries as having laws equivalent to Australia’s privacy protections . If data is sent to those approved jurisdictions, the sending business may not need to implement as many contractual safeguards. While the whitelist (an Australian version of the GDPR’s adequacy list) will be established via regulations, SMEs using cloud providers or processors overseas should watch this space. In the meantime, they must continue to ensure any overseas data sharing is compliant (usually by obtaining consent or contractually requiring the overseas recipient to uphold APP-equivalent standards).

    
    

In summary, Australia’s privacy reforms in 2024–25 amount to a comprehensive tightening of the rules: virtually all SMEs will be brought under privacy law, individuals have new rights (and ways to seek remedies), certain harmful behaviors (like doxxing) are criminalised, the regulator has stronger powers, penalties are far higher, and businesses are expected to take proactive steps in safeguarding privacy (from governance processes to technology tools). The overall trend is to hold organisations of every size more accountable for protecting personal information, much closer to the strict regimes seen in Europe – albeit adapted to Australian context .

Impact on Small and Medium Businesses: Who Will Feel it Most?

For SMEs, these changes mean privacy compliance can no longer be ignored or treated as optional. In the past, a vast majority of small businesses (over 90%) fell under the <$3M turnover exemption and might have had only informal privacy practices . Going forward, all SMEs are in scope, but those that deal heavily in personal data or sensitive information will be most affected. Key factors that increase an SME’s exposure include:

• Volume and Sensitivity of Data Collected: SMEs that routinely handle large quantities of customer personal information – especially sensitive data (health records, financial details, biometric identifiers, etc.) – will face greater obligations. For instance, a private medical clinic, psychology practice, or physiotherapy center was already covered under the Act as a health service provider, but now every allied health business or small clinic is explicitly under the regulatory spotlight . Similarly, an online retailer or hospitality business that collects thousands of customer emails and purchase histories must ensure full APP compliance, whereas before they might have been exempt. The more data (and the more sensitive the data) an SME holds, the greater the privacy risk profile and regulatory scrutiny it will attract .

• Tech-Driven and Online Businesses: SMEs that rely heavily on technology or operate online platforms are particularly impacted. The government has indicated that small businesses using advanced tech – such as AI-driven services, facial recognition or extensive tracking – will be priority targets for compliance  . For example, a startup offering an AI-based app that uses personal data for decision-making will need to meet transparency requirements about its algorithms and possibly conduct PIAs. Even a small e-commerce company with a website using targeted advertising cookies needs to ensure clear consent for any tracking. Any SME with an online presence should assume it must meet the same privacy standards as bigger companies regarding user notices, consent for data collection (like cookies or marketing sign-ups), and secure handling of customer information .

• Industries Already Subject to Privacy-Like Regulation: Some SMEs were never truly exempt because of sector-specific rules – for example, businesses trading in personal information (data brokers), those handling tax file numbers, and those involved in credit reporting have always had to comply regardless of size . These companies will now simply come under the broader Privacy Act like everyone else, but the change means no gaps – previously, a small direct marketing firm could try to avoid Privacy Act coverage unless it was caught selling personal data; now its whole operations must be compliant. Professional services firms (like lawyers, accountants) which often handle client personal info were exempt if small, but must now also implement Privacy Act standards in addition to their professional confidentiality obligations.

• Employee Data and Internal Privacy: While the reforms did not yet remove the “employee records exemption,” there is a trend toward more privacy protection even for employee information. Notably, if a serious privacy invasion occurs involving an employee’s data, the new tort could allow a lawsuit despite that exemption . SMEs will need to be mindful of staff privacy (for instance, how they monitor employees or handle HR data) because overly intrusive practices could lead to liability under general law. Future reform tranches may also bring employee data fully under the Privacy Act.

• Cross-Border and Multinational SMEs: A medium-sized business that operates internationally or uses overseas service providers faces new compliance challenges. Such businesses must keep track of Australia’s forthcoming “whitelist” of jurisdictions for data transfers. For instance, if an SME uses a cloud server in the United States or a developer in India who accesses customer data, it will have to ensure compliance either by contract or other safeguards until those countries possibly get whitelisted. These SMEs will also recognise many of the Australian changes as aligning with global norms (e.g. GDPR-style consent, breach reporting expectations), so complying can have the side benefit of easier international integration. However, the removal of Australia’s small business exemption eliminates any competitive advantage smaller Aussie firms might have had by not having privacy compliance costs – overseas clients and partners will now expect Australian SMEs to meet high data protection standards just like any large company.

  
  

In summary, the SMEs that will feel the greatest impact are those for whom data is central to their business model or who handle higher-risk information. A local café with a simple mailing list will have to tweak its processes (e.g. get clear consent for marketing emails), but a fintech startup, a medical clinic, or an online retailer will have far more work to do to meet the new obligations. The government has hinted that compliance will be scaled to risk, meaning if your small business deals with minimal personal data, the requirements (and regulator attention) should be more straightforward . Nonetheless, any SME that ignores the new laws does so at peril – even a “low-risk” business could face complaints or penalties if it fails to implement the basics of privacy protection.

Practical Implications and Compliance Challenges for SMEs

For many SMEs, these reforms may sound daunting – will it become more costly to operate a business under the new privacy regime? In the short term, yes, there will be added compliance costs and effort, as small businesses must update their practices to meet legal requirements that previously didn’t apply to them. New legal responsibilities typically entail expenses for things like staff training, conducting privacy audits, drafting privacy policies and notices, reviewing IT security, and setting up proper data handling procedures . Businesses that never budgeted for privacy compliance will need to allocate resources to it now. A recent analysis noted that imposing these duties on Australia’s 2.3 million small businesses will result in “considerable costs”, including establishing data retention policies and secure disposal methods for records . In other words, SMEs must treat privacy as a formal business process, which may require spending on professional advice or new tools – a shift from the more informal approach many had before.

However, these costs need to be weighed against the even greater costs of non-compliance or breaches. A serious data breach can incur enormous penalties (up to tens of millions of dollars) and cause reputational damage that drives away customers . Even a minor lapse, like failing to put a required clause in your privacy policy or not offering an unsubscribe option in marketing, can now trigger fines in the tens of thousands . Additionally, cyber incidents themselves are expensive – the average cost of a cyberattack on a small Australian business is estimated around $39,000, not including intangible costs . And over 80% of consumers say they would stop dealing with a company after a data breach . In this light, investing in privacy compliance is part of the cost of doing business in the digital economy – the “ounce of prevention” that can save a “pound of cure” in avoided fines or lost business.

Practically, what should SMEs do? Below are concrete steps and considerations for small and medium businesses to address the new privacy requirements:

• Update (or Create) a Privacy Policy: Every SME will need a clear, up-to-date privacy policy available to customers (typically on the website). This policy must describe what personal information the business collects, how it uses and stores that data, and who it’s shared with, in simple and accurate language  . Under the new rules, policies should also include specific disclosures required by the reforms – for example, if you use any automated decision-making or AI, list the types of personal info used and the nature of the decisions  . If you transfer data overseas (e.g. using an international cloud provider), state which countries or that you ensure adequate protection. The policy should reflect the enhanced consent standard: e.g. explain that you will seek consent for any secondary uses of data. Keeping this document comprehensive and truthful is crucial; the OAIC can penalise organisations for not having a compliant privacy policy or for misleading statements  .

• Implement Robust Data Security Measures: SMEs must take “reasonable steps” to secure personal information, now explicitly including technical and organisational measures . Technical steps include using encryption, strong passwords and multi-factor authentication, up-to-date anti-malware software, and regular backups. Organisational steps include restricting access to data on a “need-to-know” basis, onboarding and exit checklists for employees (to ensure departing staff don’t retain access), and policies on using personal devices or cloud apps for work  . Document these measures – for instance, maintain an IT security policy and an incident response plan. Regularly train your employees on data protection: every staff member should understand basics like not clicking suspicious emails (to prevent breaches) and how to handle customer information confidentially  . The law now expects ongoing training and awareness as part of compliance . Remember that “reasonable” security is scalable: a 10-person company is not expected to have a dedicated security operations center, but it should at least implement affordable protections (firewalls, secure Wi-Fi, etc.) and utilize free guidance (e.g. the Australian Cyber Security Centre’s small business security tips ).

• Review Data Collection Practices and Obtain Proper Consent: SMEs should audit what personal data they collect from customers (or employees) and why. Collect only what you need for legitimate purposes – unnecessary data is a liability. Ensure that when you collect personal information, you provide a clear notice or form explaining the purpose. If you rely on consent (e.g. a box to sign up for a newsletter, or to use customer data in testimonials), that consent must be explicit and opt-in under the new standards . Avoid pre-ticked boxes or burying consent in lengthy terms; give people a genuine choice. For any direct marketing, include simple opt-out mechanisms in every message (unsubscribe links in emails, “STOP” for texts) and honor opt-outs promptly  . Also be mindful of special categories of data: if you handle sensitive info (health, ethnicity, etc.) or children’s data, consent and transparency requirements are even stricter (parental consent for young children, etc.)  . As a practical tip, use plain English in all customer-facing notices – not only is this good compliance, it builds trust.

• Prepare for Data Breaches (It’s “when”, not “if”): Under the Notifiable Data Breaches scheme, if a SME experiences a data breach likely to result in serious harm (e.g. hackers steal customer IDs or credit card details), it must notify the individuals and the OAIC as soon as possible  . Every SME should have a data breach response plan. This is a step-by-step procedure for what to do if personal data is lost, stolen, or mistakenly disclosed. Key elements: designate a response team or person (even if it’s just the owner plus IT support), steps to secure/stop further data loss, assess the scope of breach, notify affected parties with the required info (what happened, what data, what you’re doing about it, and recommendations like reset passwords), and notify the OAIC. Practice this plan with hypothetical scenarios. Early notification can reduce damage – and under the new regime, prompt notification is not just advised but effectively required (the OAIC expects notification within 72 hours of detection for significant breaches)  . Also, retain records of any breaches and your response; regulators may ask for evidence that you took appropriate action.

• Examine Third-Party Contracts and Overseas Data Flows: Many SMEs outsource IT or use SaaS platforms (for instance, a cloud CRM to store customer data, or an external payroll provider). Review these arrangements to ensure they meet privacy requirements. If personal data is sent overseas (even just stored on a foreign server), current law (APP 8) makes your business accountable for how the overseas recipient handles it, unless an exception applies. The new “whitelist” mechanism will in future simplify compliant transfers to certain countries , but until that list is formalized, obtain assurances from service providers: e.g. include clauses requiring them to follow Australian Privacy Principles or equivalent. An experienced lawyer can help review supplier contracts to insert needed privacy and cybersecurity clauses. Additionally, monitor your data processors – you might use a marketing agency or an IT support firm that has access to personal info; ensure they also implement proper safeguards. Remember, a breach caused by a vendor can still land your SME in trouble if you didn’t take reasonable steps to prevent it.

• Address Internal Privacy Practices: SMEs should also look inward at how they handle personal information of staff and customers internally. Implement an internal privacy policy or handbook for employees, setting rules on handling personal data. For example, employees should lock or log off their computers, not take client files home without approval, and report any suspected data incident immediately. If you use cameras on premises or vehicle tracking, ensure compliance with surveillance laws and transparency to staff . Although employee records in a Pty Ltd are currently exempt from the Privacy Act, it’s wise to treat them carefully anyway – both to prepare for likely future reforms and to maintain trust with your workforce. Limit who in the company can access personal records – for instance, only HR should access personnel files, only sales team for customer contact lists, etc. By formalising these practices, SMEs can both improve security and demonstrate a culture of compliance (useful if you ever need to show the OAIC or a court that you took privacy seriously).

Will all this be costly? There will certainly be some cost increase for SMEs to meet these obligations – whether it’s subscribing to a secure software service, spending staff hours on compliance tasks, or consulting a lawyer or IT advisor. Surveys indicate some small businesses already spend a few thousand dollars a year on compliance broadly , and privacy will add to that. However, smart investments can be proportional: for example, using a reputable cloud service with built-in security might be cheaper and more effective than trying to secure a local server on your own. Free resources from government (OAIC checklists, Cyber Security Centre guides) can reduce consulting costs. In many cases, privacy compliance overlaps with good business practices (data organisation, cybersecurity hygiene) that can increase efficiency and customer confidence. Also consider that the playing field is leveling – since all businesses must comply, privacy is becoming a standard cost of doing business, not a discretionary add-on. The focus should be on risk management: identify the biggest privacy risks in your operations and tackle those first. If you handle minimal personal data, your costs will be correspondingly lower (but you still must cover the basics like a privacy policy and security safeguards). The law reforms also hint that smaller entities with lower-risk profiles won’t be expected to implement overly complex systems, as long as they earnestly comply with core principles . In sum, while operating costs may rise modestly due to privacy compliance, those costs are an investment in legal risk avoidance and customer trust. The alternative – skimping on compliance – could become far more costly if a breach or enforcement action occurs.

How an Experienced Lawyer Can Help SMEs Navigate the Reforms

The complexity of these privacy reforms means that expert guidance can be invaluable. An experienced privacy lawyer (or a qualified privacy consultant) can assist SMEs in several practical ways:

• Interpreting the New Legal Obligations: Privacy law is technical, and the recent amendments add layers of detail (from defining “personal information” expansively to specifying when a data breach must be reported). A lawyer can explain in plain English what the SME specifically needs to do to comply, tailored to the business model. For example, they can determine whether a particular SME’s use of data triggers the need for a Privacy Impact Assessment or whether certain exemptions might still apply in limited areas. They keep abreast of regulatory guidance and can distill the “legalese” into a clear action plan for the business.

• Drafting and Reviewing Documents: Lawyers can help update the company’s privacy policy and internal policies so that they meet the new standards and are legally sound . They can draft consent forms, data breach notification letters, and template clauses to use in contracts with clients or vendors. For instance, if an SME engages a marketing firm, a lawyer can insert the appropriate privacy clauses (requiring confidentiality, breach notification, etc.). Having professionally crafted documents not only ensures compliance but also gives a more credible impression to customers and partners. Similarly, if an SME is subject to industry-specific rules (say a medical practice under health privacy laws), a lawyer can consolidate those with the new federal requirements into one coherent set of obligations.

• Building a Privacy Program: Many small businesses are unfamiliar with setting up a “privacy compliance program.” Lawyers experienced in privacy can act as privacy consultants to design a program appropriate for the SME’s size  . This might include creating checklists for staff, implementing procedures for data handling (e.g. how to respond to a customer’s request for their data or deletion of data), and scheduling periodic reviews. Essentially, they help embed privacy into the business’s day-to-day operations – moving the business from a reactive stance to a proactive one. An expert advisor will focus the SME’s efforts on areas of highest risk, ensuring efficient use of resources.

• Training and Culture: Lawyers can conduct training sessions for employees to educate them on the new privacy duties. Given the criminalisation of doxxing and the emphasis on organisational measures, employee awareness is crucial. A lawyer or privacy professional can give real-world examples to staff about things like phishing risks, proper customer verification steps (to avoid wrongfully disclosing info), and the importance of not snooping in databases. This outside perspective can reinforce management’s message that privacy is a priority. It helps foster a culture where employees understand why these rules matter – not just because “the law says so,” but to respect customers and avoid harm.

• Navigating Data Breaches and Incidents: If (or when) a data breach occurs, having a lawyer on call can significantly help an SME respond correctly. They can advise on whether the incident meets the legal threshold for notification, help draft the notice to customers in a way that is accurate but mitigates liability, and liaise with the OAIC if needed. Legal counsel can also assert legal professional privilege over certain communications during an incident response, which can be important if the incident later leads to litigation or investigation. Essentially, the lawyer guides the business through the crisis: containing legal exposure, communicating properly, and preserving evidence. This can make the difference between a breach being an embarrassing but manageable event versus a regulatory nightmare or lawsuit.

• Representation and Risk Mitigation: In the worst case of a privacy complaint, regulatory audit, or lawsuit, a lawyer will represent the SME’s interests. They can engage with the OAIC during investigations, negotiate enforceable undertakings or settlements, and defend the company in court if an individual sues under the new tort or under other laws. Knowing you have a knowledgeable advocate can bring peace of mind. Even aside from representation, a good lawyer will help an SME document its compliance efforts – for example, keeping records of decisions and policies – which can serve as evidence that the business took privacy seriously. This can mitigate penalties; the OAIC often takes into account an organisation’s cooperation and prior good practices when deciding on enforcement measures  .

Ultimately, engaging an experienced privacy lawyer is about navigating complexity efficiently and preventing problems. They can often spot issues that a business owner might miss (for instance, the need to update a website’s analytics tracker disclosures, or the proper way to collect health information under both privacy law and health records laws). By getting advice early, SMEs can avoid costly trial-and-error. As one governmental guidance noted, “Seeking expert advice early on can help small businesses navigate these new regulations with ease” . In other words, a lawyer’s fee is an investment to ensure the business is on the right side of the law and can confidently demonstrate compliance to customers and regulators alike.

Turning Compliance into Competitive Advantage

It’s easy for SMEs to view these privacy reforms as just a compliance burden – another box to tick or cost to bear. However, there is a silver lining: strong privacy practices can be a business advantage in today’s market. Here’s how SMEs can leverage the changes:

• Building Customer Trust and Loyalty: In an era of daily news about data breaches, consumers are increasingly concerned about their personal information. An SME that can honestly say, “We value your privacy and have taken concrete steps to protect it,” will stand out. By complying with (or even exceeding) the law, small businesses can market themselves as trust-worthy and ethical. For example, being transparent with customers – “Here’s our updated privacy policy, and here’s how you can control your data” – can reassure and impress customers, leading to stronger loyalty. If a competitor down the street is cavalier with data and suffers a breach, guess where wary customers will go? Treat privacy compliance as a quality feature of your product or service, not just a legal obligation. SMEs can even earn certifications or badges (like the OAIC’s voluntary privacy opt-in register for small businesses, which is a public record of commitment to privacy principles  ) to showcase their dedication to data protection.

• Meeting Expectations of Business Partners: As privacy law tightens globally, larger companies and government agencies prefer to deal with vendors who have their privacy in order. By getting ahead on compliance, SMEs can qualify for contracts or clients they might otherwise miss. For instance, a corporate client might do a due diligence check and ask, “Do you have a compliant privacy policy and breach response plan?” – you can answer “Yes” confidently, which could be the deciding factor in winning the business. In this sense, privacy compliance can open doors. Also, if aiming to expand internationally (say, offering an app in the EU or US), having aligned your practices with Australia’s new stricter laws means you’re closer to meeting overseas requirements. It’s much easier to adjust to GDPR or other laws if you already operate under comparable principles.

• Operational Benefits: Implementing privacy controls often has side benefits for efficiency and security. For example, doing a data inventory (as recommended by many privacy frameworks) helps a business know what information it has and where – which can streamline operations and reduce redundant data storage . Culling data you don’t need (per the “destroy or de-identify when no longer needed” rule) not only meets legal requirements but also reduces storage costs and the amount of data at risk if a breach occurs  . Training staff on privacy can foster better overall data discipline, reducing errors. In short, privacy by design can coincide with good business design: clearer processes, less bloat, and a more security-focused culture that protects all assets, not just personal data.

• Avoiding the High Cost of Incidents: While not a “competitive advantage” in the traditional sense, one cannot overlook that robust privacy compliance will drastically lower the risk of devastating incidents. A small business that invests in cybersecurity and privacy might thwart an attempted cyberattack or catch it early, where a less prepared rival suffers a public breach. Avoiding a breach means avoiding the downtime, customer churn, and media fallout that come with it, allowing your business to keep operating smoothly and maintain its reputation. In the long run, this resilience is an advantage – customers and partners will learn which companies have a clean track record. As Australia’s Small Business Commissioner observed, it’s no longer credible for small businesses to claim they can’t protect data; those that embrace privacy will be more sustainable and robust in the modern economy  .

• Culture and Brand Differentiation: SMEs can incorporate privacy into their brand values – “We respect your privacy” can be part of the customer promise. This approach turns compliance into marketing: for instance, a boutique retailer might highlight that it doesn’t share customer data with third parties without consent and uses state-of-the-art security to protect their information. For tech startups, being able to say “Our product is privacy-friendly by design” can attract a privacy-conscious segment of users (which is growing). In effect, good privacy practices can serve as a USP (unique selling proposition), especially if your competitors are slower to adapt. Over time, as privacy becomes a norm, being a leader in this space sets the business up as forward-thinking and trustworthy, which can only enhance its brand image.

• Compliance as a Catalyst for Innovation: It might sound counterintuitive, but constraints like privacy regulations can spur innovation. SMEs have the advantage of agility – they can adapt faster than large corporations. By embracing the principles behind the law, small businesses might find creative new ways to deliver services without collecting excessive personal data, or develop anonymisation techniques to glean insights without identifiable information. This could lead to new solutions or products that appeal to users who are privacy-aware. Rather than doing the bare minimum to comply, SMEs can ask, “How can we use privacy as a design feature?” This mindset could put them ahead of regulatory curves and competitors. For example, a software SME that builds encryption into its app by default is not just compliant – it’s offering something tangibly valuable to users (security and privacy), which can be a selling point.

In essence, SMEs should reframe the privacy reforms as an opportunity: an opportunity to strengthen their systems, to differentiate their brand, and to deepen trust with their clientele . As the Small Business PEAK network put it, taking a proactive approach to these changes is the best way to manage risk – “an ounce of prevention is worth a pound of cure” – and it allows businesses to get on the front foot by protecting customers’ data interests . Companies that see privacy compliance as “just a burden” may lag behind or handle it poorly, whereas those that see the strategic value will not only comply but potentially outperform. In a market that is increasingly privacy-conscious, doing the right thing can directly translate into competitive edge.

Conclusion

The privacy landscape in Australia is undergoing transformative change, and SMEs are front and center in this shift. The removal of the small business exemption signals that no business is “too small” to safeguard personal information – every organisation that handles customer data has a duty to do so responsibly. While the new laws do impose additional compliance requirements and likely increased operating costs for SMEs, they also create a more level playing field and clear expectations for data protection across the board. Small and medium businesses should view these changes not with despair but with determination: by adapting early and thoroughly, SMEs can mitigate legal risks and foster greater trust among consumers and partners. Yes, it will require effort – updating policies, improving security, training staff, possibly investing in new tools or advice – but the cost of doing nothing (or doing the bare minimum) could be far higher in fines, breaches or lost business.

Importantly, SMEs are not alone in this journey. Government agencies like the OAIC provide guidance and checklists tailored for small business compliance , and engaging knowledgeable legal counsel can ease the transition. The key is to start now: assess your data practices, plug any obvious gaps (like lacking a privacy policy or using weak security), and build a culture that respects privacy. By weaving privacy considerations into all aspects of operations – from marketing to IT to customer service – SMEs will find that compliance becomes much more manageable and even beneficial.

Australia’s strengthening privacy regime ultimately aims to protect individuals and raise business standards in the digital age . For SMEs, aligning with this goal is not only about avoiding penalties; it’s about being part of a trusted, modern economy. Those businesses that rise to the challenge will likely find that good privacy practice is good business. As the reforms take effect, an SME that can confidently say, “We respect your data and have taken all reasonable steps to keep it safe,” will be well placed to thrive in a market where consumers and clients prize privacy more than ever. Compliance is no longer optional, but with the right approach, it can be turned into an advantage. By treating personal information with care and transparency, SMEs can strengthen their reputation, deepen customer loyalty, and differentiate themselves in a competitive landscape – all while fulfilling their legal obligations in Australia’s new privacy era .

Sources:

• Office of the Australian Information Commissioner – Privacy Act 1988 and APPs overview  

• Business Queensland (Qld Govt) – Protecting privacy and information in your business

• Small Business Development Corporation WA – What changes to the Privacy Act mean for small businesses  

• Council of Small Business Organisations Australia (Small Business PEAK) – Privacy Act changes: what SMEs need to know  

• Corrs Chambers Westgarth – Australia’s ongoing privacy reforms (Privacy Awareness Week 2025)  

• Allens – First tranche of privacy reforms – Key takeaways  

• Norton Rose Fulbright – Major privacy law reform passed (2024)  

• Corrs Chambers Westgarth – Enforcement and penalties under Privacy Act reforms  

• IAPP (International Assoc. of Privacy Professionals) – Impacts of removing SME exemption  

• Attorney-General’s Dept – Privacy Act Review Report (2023) – Government Response  

• OAIC Guidance for Small Business (pre-reform, context)  

• OAIC Media Release – Increased penalties and OAIC powers (2022)  

• Ashurst – Privacy and Other Legislation Amendment Act 2024 – Overview of reforms  

• SmallBusiness.wa.gov.au – Removal of small business exemption and risk-based approach  

• SmallBusinessPeak/COSBOA – Proactive approach as opportunity, not just risk  

This article provides general information only. Seek professional legal and accounting advice when starting a business or setting up a new business.