NAICS Explained: Why the North American Industry Classification System Matters for Australian Businesses

The world of business classification is more complex — and more important — than many Australian business owners realise. At the heart of it all sits the North American Industry Classification System (NAICS), a standard used by the United States, Canada, and Mexico to group businesses according to their primary activities. While NAICS is a North American invention, its ripple effects are increasingly felt in Australia’s finance, trade, and regulatory sectors. Here’s what you need to know about NAICS, why it matters, and what it could mean for your next big decision.

What is NAICS? A Quick Primer

NAICS (pronounced “nakes”) was introduced in 1997 as a replacement for the older Standard Industrial Classification (SIC) system. Developed jointly by the U.S., Canada, and Mexico, NAICS provides a unified way to categorise businesses for statistical, regulatory, and economic purposes. The system is updated every five years — with the most recent revision released in 2022 and the next due in 2027. NAICS codes are six digits long, each digit representing a deeper level of industry detail:

• First two digits: Economic sector (e.g. 11 for Agriculture, Forestry, Fishing and Hunting)
• Third digit: Subsector (e.g. 311 for Food Manufacturing)
• Fourth digit: Industry group
• Fifth digit: NAICS industry
• Sixth digit: National industry

For example, a company with the code 541511 is classified as ‘Custom Computer Programming Services’.

Why Should Australian Businesses Care About NAICS?

NAICS isn’t just an American quirk. As global supply chains become more entwined and trade relationships deepen, NAICS codes are increasingly used as a ‘common language’ in international business, particularly when dealing with North American partners. Here’s why it pays to understand NAICS in 2025:

• Exporting to the US or Canada: If your business exports goods or services to North America, you’ll almost certainly be asked to provide a NAICS code for customs, compliance, or tendering purposes.
• Global tenders and contracts: Many multinational corporations and government agencies use NAICS codes to identify eligible suppliers or benchmark performance, even outside North America.
• Access to international finance: Some international lenders, investors, and insurers rely on NAICS codes for risk assessment and portfolio management, especially in cross-border deals.
• Data and benchmarking: Want to compare your business’s performance to global peers? Many industry research databases and analytics platforms use NAICS as their primary classification system, allowing for apples-to-apples comparisons.

For example, an Australian agtech startup eyeing US expansion might find that their NAICS code determines not just how they’re taxed or regulated, but also their eligibility for government grants or even which industry events they can attend.

NAICS and Australia: Bridging the Classification Gap

Australia uses its own system, the Australian and New Zealand Standard Industrial Classification (ANZSIC). While ANZSIC and NAICS are conceptually similar, the codes and categories don’t always match up perfectly. Here’s what to keep in mind in 2025:

• Mapping tools are available: The ABS and several global consultancies offer ‘crosswalks’ — tables to convert ANZSIC codes to NAICS and vice versa. This is crucial for companies operating internationally or reporting to both Australian and North American authorities.
• Regulatory convergence is accelerating: With the 2024–25 Free Trade Agreement enhancements between Australia and the US, several Australian industries are being encouraged to adopt NAICS codes for trade reporting and compliance to smooth out cross-border bureaucracy.
• Digital platforms are shifting: In 2025, several major cloud accounting and ERP providers now prompt Australian users to enter NAICS codes when setting up international trading modules.

Real-world example: In 2024, a Sydney-based fintech seeking US investment found that its NAICS code affected which venture capital funds would consider their pitch, as some funds had mandates to invest only in specific NAICS-classified industries.

NAICS Updates: What’s New in 2025?

NAICS is not a static system. The 2022 update brought significant changes, including new codes for rapidly evolving sectors like renewable energy, cloud services, and e-commerce logistics. Looking ahead:

• AI and Digital Services: The 2025 interim update (ahead of the next full revision) is expected to introduce finer granularity for AI-driven business models and digital health, reflecting the surge in cross-border tech activity.
• Climate and ESG reporting: NAICS codes are increasingly tied to climate risk and ESG reporting. Australian exporters of carbon credits or renewable tech may need to reference updated NAICS categories to satisfy US or Canadian regulators.
• Trade negotiations: Ongoing Australia-US trade talks may soon see ANZSIC-NAICS cross-mapping become a standard feature in customs declarations and digital trade documents.

Conclusion: NAICS — Not Just for North America Anymore

The North American Industry Classification System is far more than a bureaucratic box-ticking exercise. For Australian businesses with global ambitions, understanding NAICS is increasingly essential for winning contracts, attracting investment, and staying compliant in a fast-evolving trade environment. As international standards converge, now is the time to get familiar with NAICS and how it intersects with your business’s future.