Selling Your Own Soap in Australia

We love making our own soap and have recently begun to sell our excess soap online.  Imagine my delight when I received an interesting question about the process of selling soap in Australia.

So with permission from the author, I am replying to it publicly and sharing what I know.  It’s about the rules and legal implications of making and selling your own soap.  Over to the question.

Sue asks;

Hi there Gavin,

I have got right into making soap but now I would like to start selling it, are you able to give me a few pointers.  Have you actually started selling soap as yet? I’m getting very confused with what is needed or not needed. Have you found an insurer as yet, would love to hear how you get on.

Do I have to actually register as a business or can I do it just as a hobby? Is there any costs involved?

I know you are a busy person but if I could just get a little advice to help me I would be greatly appreciated. I live in Central NSW so there are not a lot of working opportunities here.

Look forward to hearing from you at your earliest convenience.

Cheers Sue

Thanks for your question Sue and well done for making your own soap.

Yes we do make and sell our own soap in our online store, Little Green Workshops.  However, before we did, we had to make sure that we conformed to any relevant legislation and had liability insurance.

We make our soap using the Cold Process method, which involves the addition of caustic soda (Lye) to oils or fats which then emulsify and harden via the saponification process.  Technically this process is taking a set of ingredients and changing them via chemical reaction and creating a new set of chemicals.

In Australia the Department of Health administer the National Industrial Chemicals Notification and Assessment Scheme (NICNAS).  The scheme regulates the manufacture of chemicals including those uses for cosmetics.

Their site states;

Soaps and other cosmetics and toiletries are made up of industrial chemicals; they are subject to certain requirements under the Industrial Chemicals (Notification and Assessment) Act 1989 (the Act), including NICNAS Registration requirements.

These requirements apply if you:

• Manufacture chemicals (including soap) which are used in cosmetic products.
• Import packaged cosmetic products for retail sale.
• Import chemicals which will be used in the formulation of cosmetic products.

Soap making utilises a chemical reaction between a fat and an alkali to produce glycerol and soap.  Animal or vegetable fat is reacted with an alkali, generally sodium or potassium hydroxide or carbonate, and when the hydrolysis reaction is complete the soap is processed by one of several different methods depending on whether it is being made traditionally or by industrial manufacture.  The “cold-process” and “hot-process” methods of soap making both use the saponification reaction.

Making soap from products such as “soap bases”, “glycerin blocks” and “melt and pour bases” may not involve a chemical reaction because the saponification reaction has already occurred during the manufacture of the product.

So if you use the Melt and Pour method, you do not need to register with NICNAS.  However the cost of the ingredients for this method is prohibitive if making in large quantities.

As we use the cold-process method which is much cheaper (and more fun), we have registered with the scheme, which in 2015 has cost us $138 per annum.  The fee has certainly dropped a lot from when we first enquired in 2010.  I gave the Department of Health a call to ask a few questions about the NR-1A registration form.  They told me that all I had to do was fill out our business details including our Australian Business Number (ABN), and pay the fee.

We also have to adhere to the product labelling laws to ensure that all ingredients are listed on the soap in order of quantity.  There are a few other cosmetic labelling rules, but they are pretty simple to comply with.

So that’s the legal stuff.

The other part is a little more tricky because to gain registration to sell soap you must be a legal entity.  Kim registered as a sole trader and has an ABN, and I am her willing volunteer.  This also helps us to gain the appropriate business insurance which is essential these days for any small business.

We have a business insurance package via YOUI, which includes public liability for our workshops and visitors picking up orders, and a product insurance for any of the products we sell.  Small business insurance doesn’t come cheap.  Expect to pay at least $500 for an annual policy of $5 million cover as a minimum.  It is wise to protect against unknown events, even if you just sell the soap at market stalls.

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Update 31Aug2015: After further investigation, we have found that we have to renegotiate our insurance coverage, as it seems that even though I explicitly told our previous insurers that we made soap and were potentially going to sell it, that we may not be covered.  Check out this post for further discussion; Soap Making: Product Liability Insurance

Update 02Oct2015: We have the issue all sorted.  I confirmed with our business insurance provider that we were covered to make and sell soap on our site, Little Green Workshops.  Check out this post for further information; Soap Making Update: Good to Go!

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We find that we actually sell more soap making kits than we do the actual soap, but that is fine by us as we love making our own soap as well.

We went to all the trouble of providing it on our site because;

1. We have an excess of the stuff because we make demo blocks for each of our soap making classes, and
2. Because we know that people are time poor and may not have enough hours in the day to make soap as well as trying to start living a more sustainable lifestyle.

So there you have it, all I know about selling soap in Australia, besides how to market it which would be a whole new post.  I hope that helps Sue and anyone else who may be interested in making and selling their own cold or hot process soap.

I am not an expert by a long shot, but I believe we have all the bases covered.  If anyone else has more information that would help Sue, please chime in via comment.