Small business warns apprenticeship funding cuts will undermine Australia’s skills pipeline

The Council of Small Business Organisations Australia (COSBOA) says the Federal Government’s decision to significantly reduce apprenticeship incentives for selected industries from 1 January 2026, will have damaging consequences for small business workforce development; warning the move will deter employers from hiring apprentices and worsen already critical skills shortages.

Under the changes announced on 1 December, enhanced financial incentives will continue only for apprentices in the Key Apprenticeship Program (KAP) sectors of housing construction and clean energy. All other priority occupations will see support for both apprentices and employers halved.

COSBOA Chair, Matthew Addison, said the sudden withdrawal of support across these sectors represents a major policy misstep.

“Small businesses rely on apprenticeships to build capability, bring new entrants into their industries and maintain a skilled workforce,” Mr Addison said. “Halving incentives with just four weeks’ notice will discourage employers from taking on apprentices at a time when many are already struggling to find staff. It is short-sighted, poorly timed and risks long-term damage to Australia’s skills pipeline.”

Mr Addison said COSBOA is urging the Government to reconsider and immediately retract the cuts, restoring – or increasing – funding across all apprenticeship pathways.

“We should be investing more, not less, in apprenticeships. Completion rates are already low. Cutting incentives now will push them even lower.”

COSBOA said the changes have triggered significant concern among its member associations across sectors that sit at the heart of Australia’s small business economy.

The Australian Restaurant & Café Association (ARCA) has already advised that hospitality employers are forecasting reduced apprentice intake in 2026. The Association warned that the changes “create winners and losers across essential service industries” and risk driving young Australians away from trades already facing severe workforce shortages.

The Australian Hairdressing Council (AHC), representing an industry with declining apprenticeship enrolments and completions, told COSBOA the timing of the change is “devastating”, noting that January is the peak recruitment period for salons and barbershops. Without adequate incentives, many owners will be less able to take on apprentices, jeopardising the future talent pipeline of the industry.

The Australian Swim Schools Association (ASSA) has also raised concerns that reduced incentives for Certificate III traineeship pathways will make it more difficult for small swim schools to attract and retain staff, at a time when communities are already experiencing shortages of qualified instructors, a workforce essential to water safety and early childhood development.

In addition, the Australian Meat Industry Council (AMIC) has advised that butcher and smallgoods apprenticeships will be affected, further constraining the ability of businesses to attract new entrants to a trade already impacted by ageing workforces and limited training pathways.

“These are not isolated cases,” Mr Addison said. “Hospitality, hairdressing, personal services, swimming instruction, automotive repair, retail, pharmacy, aged care, beauty, childcare and the meat industry are all small-business-dominated sectors that depend on apprenticeships. They are already screaming out for skilled workers, and they can only get skilled workers if apprentices are supported from the start.”

Mr Addison also criticised the lack of consultation prior to the announcement.

“Changes of this magnitude require proper engagement with industry. Implementing them within a month is unreasonable and shows a disregard for the planning cycles of small businesses.”

COSBOA is urging the Government to engage directly with affected industries and reinstate equitable support across the entire apprenticeship system.

“Australia cannot afford a two-speed skills system,” Mr Addison said. “Every sector contributes to our economy and communities. Every sector deserves a strong, well-supported apprenticeship pipeline. We urge the Government to reconsider these changes immediately.”

For more information on COSBOA, visit: cosboa.org.au.

-ENDS-

Notes to Editors:

For media enquiries or interviews, please contact Matthew Addison, Chair, COSBOA on chair@cosboa.org.au or call +61 (0) 421 553 613.

About COSBOA

Established in 1979, The Council of Small Business Organisations Australia (COSBOA) is a member based not-for-profit organisation exclusively representing the interests of small businesses. The capability, representation, and reach of COSBOA are defined by a mix of over 50 national and state-based members. COSBOA's strength is its capacity to harness its members' views and advance consensus across policy areas common to many.

Our member organisations work with the COSBOA team to assist us with policy development and guide our advocacy - not just for small businesses but also for the benefit of the Australians they employ. In this capacity, COSBOA makes submissions and representations to the government, including its agencies, on issues affecting small businesses and to pursue good policy.