Legal high entrepreneur Matt Bowden says the Government has made the right move towards restricting regulation for manufacturing the drugs.
Associate Health Minister Peter Dunne announced today an estimated $180,000 in application fees will be expected for any new legal high products being manufactured, as well as $1 million to $2m in testing costs.
People found to be manufacturing or selling banned substances face up to eight years in prison.
Bowden, developer of the now illegal synthetic cannabis Kronic, said Dunne had "struck the right balance" with the new regulations.
"If you set the laws too tight, you empower the black market and you end up with more dangerous drugs.
"If you have the laws too loose, you end up with drugs out there with no controls over them."
Dunne said today he made no apologies for "setting the bar high on public safety" by placing the regime costs on the legal highs industry rather than taxpayers.
"It's really about giving an assurance to the users, and in many cases the parents, and to the wider community that are available and safe.
"We will no longer play the cat-and-mouse game of constantly chasing down substances after they are on the market," Dunne said.
The Hempstore owner Chris Fowlie said it was time the Government cracked down on regulations, but feared the industry could be forced underground.
"My big concern is that the regulations will be so tough, that in effect nothing will be approved, and then you end up forcing everyone into the underground, the black economy. "
Other restrictions include a $300 fine for personal possession of an unapproved product, minimum purchase ages of 18 and no advertising of legal highs except at the point of sale.
A press release from Dunne's office stated the Government was not endorsing drugs but said it would not issue a carpet ban over the legal high industry because legislation should not be used to restrict products that cannot be proved to be harmful.
The new regimes will come into effect by the middle of next year.