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How to prepare regulatory impact assessments

Advice and guidance for departmental and agency staff preparing impact assessments.

Better Regulation Victoria (BRV) provides advice and guidance for departmental and agency staff preparing regulatory impact assessments, including Regulatory Impact Statements (RISs) for statutory rules and legislative instruments and Legislative Impact Assessments (LIAs) for Bills.

Our staff are experts in the preparation and assessment of impact analysis. We offer clear, simple and practical advice on the Victorian Government’s requirements.

Victorian Guide to Regulation

Victorian Guide to Regulation

The Victorian Guide to Regulation (the Guide) explains the Government's approach and requirements for impact analysis. The current edition was released in November 2016.

The Guide should be read in conjunction with:

The seven key questions

The Guide explains seven key questions that must be answered in an impact assessment:

  1. Why is the Government considering action? (problem analysis)
  2. Which outcomes is the Government aiming to achieve? (objectives for action)
  3. What are the possible different courses of action that could be taken? (identify feasible options)
  4. What are the expected impacts (benefits and costs) of options and what is the preferred option? (impact analysis)
  5. What are the characteristics of the preferred option, including small business and competition impacts? (summarise the preferred option)
  6. How will the preferred option be put into place? (implementation plan)
  7. When (and how) will the Government evaluate the effectiveness of the preferred option in meeting the objectives? (evaluation strategy)

In addition, an impact assessment must include the views of stakeholders consulted to date and how future consultation will be undertaken.

Contents of an effective impact assessment

To effectively answer these questions, BRV suggests in most cases an effective impact assessment should include the following sections:

  1. A good problem analysis should clearly answer: "Why is the Government considering action?"

    This section should set out the case for action. It should describe a "problem" - an actual or potential harm to the community that the Government wishes to address or reduce.

    It can rely on various approaches or frameworks, including market failures, behavioural sciences, risk management, and social or equity concerns.

    It should provide a clear, succinct and evidence-based description of:

    • the problems or risks
    • their actual or potential significance
    • the underlying causes
    • who is affected
  2. When explaining objectives for action, the impact assessment should clearly answer: "Which outcomes is the Government aiming to achieve?"

    This section should define the specific outcomes the Government aims to achieve in relation to the problem defined in the previous stage.

    It should be focused on the ends that Government is aiming for (rather than the means to achieving them). It should draw on the problem analysis and mechanisms or harms it identified, and link to broader Government objectives (such as increasing productivity) that may be relevant.

    This section should provide a clear description of:

    • the objectives of Government action (for example, improved health)
    • a clear statement of the relative importance of these objectives
    • where relevant, intermediate indicators that can help assess whether the Government is achieving these objectives
  3. An impact analysis should clearly answer: "What are the possible different courses of action that could be taken?"

    This section should identify feasible options capable of addressing the problem, and achieving the objectives, described above.

    It should broadly discuss different approaches, including non-regulatory options, approaches in other jurisdictions, and improvements to existing regulatory regimes and regulatory practice. Where possible, stakeholders should be involved in identifying possible options to address the problems they are facing while avoiding complex, onerous or ineffective requirements.

    This section should provide a clear description of the broad range of possible options which address the problem, and an explanation of how they were selected and why other options were considered infeasible.

  4. A good impact analysis should clearly answer: "What are the expected impacts (benefits and costs) of options and what is the preferred option?"

    This section should identify the anticipated impacts of the feasible options and provide a clear explanation of how this was done. It should determine the preferred option, after accounting for all the costs and benefits, and provide clear advice to the Government on the potential effects of options, for informed final decisions.

    Impact analyses can draw on relevant evidence and data, and use qualitative and qualitative approaches to estimate the likely effects of the feasible options in terms of:

    • who will be affected and the actions people / organisations will take
    • the size and value of benefits in terms of reduced harms or improved outcomes
    • potential indirect and flow-on effects of actions taken (for example, where businesses may pass on costs to customers, or reduce the services they offer)

    This section should provide a clear description of the expected costs and benefits of the feasible options (economic, social and environmental), including possible unintended effects. It should provide an objective, transparent and consistent comparison of options, using the problem analysis as a starting point.

  5. When summarising the preferred option, answer: "What are the characteristics of the preferred option, including small business and competition impacts?"

    This section might not be needed for simple proposals where a good summary can be provided in an executive summary or impact analysis section. For more complex proposals, a separate section should ensure the Government and stakeholders are given sufficient summary information about the preferred option to understand what it will mean in practice.

    No new analysis is required in this summary, but it should include information from other parts of the impact assessment that stakeholders would need to know about the preferred option and how it would affect them. Consider the knowledge, expectations and needs of affected stakeholders.

    This section should provide a clear summary of the key features of the preferred option and how it will function in practice. Compared to other sections in the impact analysis, it might:

    • include more detail on specific design issues for the preferred option
    • compare the preferred option with the status quo
    • link to the drafting instructions (for legislation) or exposure draft (for regulations or other regulatory instruments)
    • provide a summary for stakeholders who may not have fully read the impact analysis

    It should also include specific summaries of the proposal's impacts on small business and competition.

  6. An implementation plan should clearly answer: "How will the preferred option be put into place?"

    It should set out a clear, practical strategy for implementing the preferred option, by outlining:

    • what needs to be done
    • who will be doing it
    • when it will be done
    • who will monitor implementation

    Draw on the analysis from options development about likely implementation issues, and collaborate with those who will implement the preferred option to address these in the implementation plan. This will be easier when affected parties, delivery agencies and regulators are involved early in the impact assessment.

    Document the Government's roles and resource requirements at a sufficient level to ensure accountability and to govern delivery and performance over time.

    This section should clearly set out responsibilities for, and approach to:

    • implementation planning, including transitional arrangements, communications and compliance
    • how any capability and resourcing issues will be addressed
    • delivery, oversight, feedback and review needs
  7. An evaluation strategy should clearly answer: "When (and how) will the Government evaluate the effectiveness of the preferred option in meeting the objectives?"

    This section should establish mechanisms that will enable the Government to explain how, and how well, the preferred option has worked in practice, and to drive continuous improvement of regulatory arrangements over time.

    To develop an evaluation strategy, you should consider the information and data you already collect, and where information and data might be lacking. A clear strategy will confirm the roles and responsibilities for evidence gathering, monitoring and evaluation, and document the relationships between:

    • the long-term objectives and outcomes sought (such as reduced harms)
    • intermediate outcomes (such as the awareness and behaviours of regulated parties)
    • implementation of the preferred option, including regulator activities, outputs and immediate outcomes

    It should provide a clear strategy or method for evaluating the actual effects of the preferred option, explaining:

    • what will be evaluated
    • how it will be done
    • who will do it
    • when it will be done

Additional BRV guidance

BRV has also prepared further guidance to assist Government departments and agencies preparing their regulatory impact assessments including RISs and LIAs.

Please contact us at for further advice on any other issues.

Toolkit: Requirements and Processes for Making Subordinate Legislation

Hints and tips on preparing a Regulatory Impact Statement (RIS) or a Legislative Impact Assessment (LIA)

Hints and tips for Preparing a Regulatory Impact Statement for sunsetting regulations

Guidance Note - Fees RISs

This guidance note provides advice on preparing RISs for regulations that set fees for government licences, services and other activities. This note is designed to complement the Guide and Cost Recovery GuidelinesExternal Link published by the Department of Treasury and Finance.

Guidance Note - Suggested Value of a Statistical Life in RISs and LIAs

The Value of a Statistical Life (VSL) method is sometimes used to estimate the value of the lives that might be saved by a policy intervention, especially in health or safety contexts. This guidance note provides advice for using the VSL method in an impact analysis.

Guidance Note - Multi-Criteria Analysis (MCA)

This guidance note explains how to use MCA as a decision tool in impact analysis.

Other guidance

Other agencies have prepared advice on preparing or analysing regulation, which may be useful.

Smart Regulation: Grappling with Risk

The former Victorian Competition and Efficiency Commission (VCEC) published this guidance on prioritising regulatory effort through risk-based approaches.

Notes for Guidance on the preparation of Statutory Rules

The Office of the Chief Parliamentary Counsel (OCPC) has published advice on preparing statutory rules, available at the OCPC website.

Penalty and fee units

The Department of Treasury and FinanceExternal Link and the OCPCExternal Link have both published advice on penalty and fee units.

Scrutiny of Acts and Regulations Committee

The Scrutiny of Acts and Regulations Committee of the Victorian Parliament publishes a range of practice notes and checklists, as well as an Annual Review of Victorian regulations.

More information is available on the Victorian Parliament websiteExternal Link .

Reviewed 10 February 2021

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