Small Business in Australia

Definition

Small businesses, as defined by the Australian Bureau of Statistics, are those with less than 20 employees.¹

Number of small businesses

There are approximately 1.93 million active small businesses (1,927,590) in Australia, representing 96 per cent of all businesses (2,011,770).² (June 2007)

Sizes of businesses

Around 61 per cent (1,171,832) of small businesses are non-employing businesses, 27 per cent (527,445) employ between 1 and 4 people, and 12 per cent (228,313) employ 5 to 19 people.³ (June 2007) (An active business is defined as one that has an ABN and has had an active GST role in any of the last four quarters. An employing business is defined as one that has an income tax withholding (ITW) role.)

Growth

There was net growth of 49,695 small businesses in 2006-07. Since June 2003, the number of employing small businesses has grown by 37.4 per cent.⁴

Economic contribution

Small business forms a vital part of the Australian economy, contributing around 39 per cent of private industry value added in 2007–08.⁵

Exports

17,017 small exporters shipped goods to the value of $1.2 billion in 2007–08. This represents 39 per cent of all goods exporters and 1 per cent of the total value of all goods exported.⁶

Employment

Small businesses provided employment for 5.1 million people as at June 2008, accounting for around half of private sector employment, which was 10.0 million people at June 2008.⁷

Business entries and exits

In 2006–07 there were 330,453 small business entries and 280,758 small business exits. Business failures make up only a small subset of total exits.⁸

Demographics

In June 2006, 68 per cent of non-agricultural small business operators were male and 32 per cent female, 29 per cent of small business operators were born overseas, 58 per cent of small business operators were aged between 30 and 50 years, 33 per cent were aged over 50 years and 9 per cent were aged less than 30 years.⁹

Home operators

Around 67.5 per cent of all small businesses are home based (ie. operated either from home or at home).¹⁰ Approximately 70.7 per cent of operators are male and 39.6 per cent of home-based operators worked less than 35 hours per week compared to 32.9 per cent for all small business operators (June 2004).¹¹

Computers, the internet and eCommerce

Around 97 per cent of small businesses own a computer, 93 per cent of small businesses are connected to the internet (and 94 per cent of those have broadband connections), 71 per cent used the internet to place orders, 67 per cent received payments over the internet, 57 per cent took orders over the internet, and 54 per cent of small businesses have a website (July 2008).¹²

Time spent at work

• 22 per cent of small business owners estimate they work 41 to 50 hours in a typical working week.
• 18 per cent of small business owners estimate they work 51 to 70 hours in a typical working week.
• 6 per cent of small business owners estimate they work over 70 hours in a typical working week.¹³

Typical income

*Note: May not sum to total due to rounding.

Business structure

In August 2006, 60 per cent of small business operators operated unincorporated enterprises while 40 per cent operated incorporated enterprises.¹⁵

Number of small business operations

In June 2006, 92 per cent of all small business operators operated one business, 6 per cent operated two businesses and 2 per cent operated three or more businesses.¹⁶

Interest rates on small business loans

The RBA has reduced the official cash rate target by 400 basis points since September 2008:

• 3 September 2008—by 25 basis points
• 8 October 2008—by 100 basis points
• 5 November 2008—by 75 basis points
• 2 December 2008—by 100 basis points
• 4 February 2009—by 100 basis points
• 8 April 2009—by 25 basis points.

The table below compares the RBA's small business indicator lending rates (residentially secured) with the RBA cash rate target.¹⁷

Table: Small business indicator rates vs the RBA cash rate target

Source: RBA.

Published data from September 2008 to June 2009 suggest that banks have passed through approximately 71 per cent of cash rate target reductions (2.85 percentage points out of 4 percentage points).

Independent contractors

The Australian Bureau of Statistics (ABS) has developed a module for collecting data on contractors and labour hire workers. The module, which is part of the Forms of Employment Survey, will enable the ABS to publish accurate data on the number of independent contractors on an annual basis. Information on labour hire workers will be published on a three yearly basis. This section of the factsheet will be updated with this information shortly.

References

1. ABS Small Business in Australia 2001 – 1321.0, p 1.
2. ABS Counts of Australian Businesses, Including Entries and Exits, June 2003 to June 2007 – 8165.0, Table 13 p 18.
3. ABS Counts of Australian Businesses, Including Entries and Exits, June 2003 to June 2007 – 8165.0, Table 13 p 18.
4. ABS Counts of Australian Businesses, Including Entries and Exits, June 2003 to June 2007 – 8165.0, Table 13 p 18.
5. DIISR estimate based on ABS Australian Industry 2007–08– 8155.0, Table 2.1, p 24.
6. ABS Number and Characteristics of Australian Exporters, 2007–08 – 5368.0.55.006, p 13.
7. ABS Australian Industry 2007–08 – 8155.0, Table 2.1, p 24.
8. ABS Counts of Australian Businesses, Including Entries and Exits, June 2003 to June 2007 – 8165.0, Table 13 p 18.
9. ABS Australian Small Business Operators – Findings From the 2005 and 2006 Characteristics of Small Business Surveys,
        2005–06, released 6 August 2008. 8127.0
10. ABS Characteristics of Small Business 2004 – 8127.0, p 70.
11. ABS Characteristics of Small Business 2004 – 8127.0, p 72.
12. Sensis E-Business Report July 2008, p 4, 10 & 14.
13. MYOB Australian Small Business Survey Special Focus Report, December 2008, p 31.
14. ABS Counts of Australian Business Operators 2006–07 – 8175.0, Table 2.6 p 22. 
15. ABS Counts of Australian Business Operators 2006–07 – 8175.0, Table 2.2 p 20.
16. ABS Australian Small Business Operators – Findings From the 2005 and 2006 Characteristics of Small Business Surveys,; 2005–06, released 6 August 2008. 8127.0
17. RBA Bulletin, Table F05, accessed 16 June 2009.