2019 Small Business Counts - ASBFEO
Small Business CountsSmall business in the Australian economyJuly 2019
Commonwealth of Australia 2019ISBN 978-1-76051-716-8This publication is available for your use under a Creative Commons BY Attribution 3.0 Australia licence, with theexception of the Commonwealth Coat of Arms, the Ombudsman logo, photographs, images, signatures and whereotherwise stated. The full licence terms are available from lcode.Use of Ombudsman material under a Creative Commons BY Attribution 3.0 Australia licence requires you to attribute thework (but not in any way that suggests that the Ombudsman endorses you or your use of the work).Ombudsman material used ‘as supplied’.Provided you have not modified or transformed Ombudsman material in any way including, for example, by changing theOmbudsman text; calculating percentage changes; graphing or charting data; or deriving new statistics from publishedOmbudsman statistics—then Ombudsman prefers the following attribution:Source: The Australian Small Business and Family Enterprise Ombudsman.Derivative materialIf you have modified or transformed Ombudsman material, or derived new material from those of the Ombudsman in anyway, then the Ombudsman prefers the following attribution:Based on The Australian Small Business and Family Enterprise Ombudsman data.Use of the Coat of ArmsThe terms under which the Coat of Arms can be used are set out on the It’s an Honour website(www.itsanhonour.gov.au).Other usesInquiries regarding this license and any other use of this document can be directed to:ManagerMedia and CommunicationsAustralian Small Business and Family Enterprise Ombudsman02 6121 3000media@asbfeo.gov.auThis report outlines the research and findings on small business statistics. Due care has been exercised in thepreparation of this publication. Notwithstanding, the Office of the Australian Small Business and Family EnterpriseOmbudsman, its employees and advisers disclaim all liability whatsoever, including liability for negligence and for anyloss, damage, injury, expense or cost incurred by any person as a result of accessing, using or relying upon any of theinformation in this research paper to the maximum extent permitted by law.
Contents122.12.2IntroductionSmall business share of economic activitySmall business numbers2.1.12.1.22.1.32.1.4677Measured by employment . 7Measured by turnover . 8Measured by survival . 9Nano businesses . 10Contribution to GDP10Employment14Apprentice and trainee employment192.52.6Tax contributionSmall business industry benchmarks22233Small business owners244Innovative 2.3.22.3.32.4.12.4.2By percentage. 10By dollar terms . 13By business size . 14By industry sector . 15By status . 17By business size . 19By industry sector . 20Taxable incomeAge of small business ownersWomen in small businessInnovation by activity and sizeInnovation and business performanceHarnessing ideas4.3.14.3.2242525282931Investment in R&D . 32Investment by sector. 325Being online366Exporting397Challenges for small nternet usageSocial mediaSingle touch payrollBy size of businessBy industryBy value of exportsBarriers to innovationAccess to financePayment timesAccess to justiceCybersecurityGovernment assistanceGovernment procurementAustralian Small Business and Family Enterprise Ombudsman - Small Business Counts 2019363738393940424243444646473
ForewordAustralia is a nation of small businesses - the engine room of the economy.As Australian Small Business and Family Enterprise Ombudsman, I meet hundreds of business ownersevery year, from small to medium enterprises and sole traders. It’s a dynamic and exciting sector, run bypassionate and inspiring people.Part of my role is to lift the profile of the Australian small business sector so it gets the attention and supportit deserves – from all levels of government, the public sector, the big end of town and the media.Since the office opened in March 2016, we have provided direct support to thousands of businesses involvedin disputes, delivered numerous inquiries, reviews and research reports into key issues impacting the smallbusiness sector and made hundreds of submissions to government to ensure the small business voice isheard. Over that time we have seen some notable changes across a range of small business statistics,which are reflected in this report.We have found that 61% of employing small businesses owners are aged between 45 and 59 years. Thisreport highlights the challenges this generational shift presents to the sector and the economy more broadly,as these hardworking small business operators approach retirement age.These statistics, collected from various Australian government agencies, give us a greater understanding ofthe small business sector and can be used effectively in the work we do.As the sector continues to drive the economy forward, employing close to half of the nation’s workforce, itshows why small businesses really do count.Kate CarnellAO Australian Small Business and Family Enterprise OmbudsmanAustralian Small Business and Family Enterprise Ombudsman - Small Business Counts 20194
OverviewSmall business and family enterprise in Australia, classified as businesses with less than 20 employees,account for almost 98% of businesses. The sector is growing fast and as such, presents many opportunities– and challenges – for those who dedicate themselves to pursuing a small business venture.Small businesses are prevalent in all sectors of the economy and in all of Australia’s regions. There is no‘typical’ small business. This report draws together statistics from several sources to illustrate the size andimportance of the small business sector to the Australian economy.Small businesses account for 35% of Australia’s gross domestic profit and employ 44% of Australia’sworkforce. Of the 877,744 total employing businesses, 823,551 are small businesses (93.8%), and of thosebusinesses, 627,932 are businesses that employ only 1-4 people, known as micro businesses (76.2%).Small businesses often have net income well below the average Australian wage with 52% of small businessowners registered with the ATO as individuals earning between 0 and 25,000 per annum. The highestproportion of small business owners are between 45 and 59 years old, and women account for 35% ofbusiness owner/managers.Across a range of statistics the highest contribution from small businesses comes from three sectors.Agriculture, forestry and fishing small businesses account for the highest value add, are fifth by dollar valueand employ the highest number of the workforce. Construction is ranked fourth by number of smallbusinesses generating value add but first by dollar value. Construction is third in employment and engagesthe highest number of apprentices and trainees. Rental, hiring and real estate accounts for the secondhighest value add, second highest number of employees and second highest number of apprentices andtrainees.While total apprentice and trainee numbers have fallen significantly since 2012, there has been a slightupturn in apprentice and trainee employment by small businesses since 2015. The construction sectoremploys the highest number of apprentices and trainees with small businesses representing 56%.Micro and small businesses are more likely to innovate and bring new goods and services to a market thanlarge businesses. Measured in absolute numbers, the overwhelming majority of innovative firms (classifiedas a business that introduced a new or significantly improved good or service, operational or organisationalprocess or marketing method 1) are small businesses.The challenge for small businesses to remain viable is exacerbated by the late payment of customerinvoices. Just over half of small businesses receive invoice payments late, with late payments arriving anaverage of 23 days after they are due. 2 Accessing external capital to support cash flow is also becomingmore difficult. In February 2019, lending to businesses decreased by 2.4%, and since February 2018 it hasdecreased 3.3%. 3A healthy small business sector is a prerequisite for a growing economy with high employment opportunities.In a very real sense, small business counts. What emerges from this report is a picture of a large and vibrantsector, which is vital to the health of the Australian economy.123ABS 8166.0 Summary of IT use and innovation in Australian business, 2016-17: GlossaryXero Small Business Insights, Paying the price: the economic impact of big business paying Australian small businesses late, 2019ABS 5601.0 Lending to households and businesses, Australia Feb 2019, April 2019Australian Small Business and Family Enterprise Ombudsman - Small Business Counts 20195
1IntroductionThis report brings together the Australian Bureau of Statistics (ABS), Australian Taxation Office (ATO) andAustrade data to present a statistical report of the small business sector. It shows the contribution of thesmall business sector to the Australian economy.Its purpose is to be an information resource for governments, public policy makers and researchers that willimprove their knowledge and understanding of the Australian small business sector. The report isdata-based and does not comment on the policy issues or concerns of the small business sector. It simplysets the scene to give all stakeholders a common understanding of the significance of small businesscontribution to economic activity.The data and graphs in this report are based on the ABS definition of a small business: a business with anAustralian Business Number (ABN) and having Goods and Services Tax (GST) activity with a turnover ofless than 2 million per annum (p.a.), or one that employs less than 20 people. There is a roughapproximation between these two measures, but they are not identical. Accordingly, there are minordifferences in the counts of Australian small businesses depending upon whether the turnover or employeedefinition of a small business is used.In this report, unless otherwise stated, the term ‘small businesses’ will include micro businesses, which aredefined by the ABS as GST paying enterprises employing 0-4 employees. However, unless otherwise stated,the data counts do not include extremely small businesses which have an ABN, but are not GST active andhave no employees; it also excludes self-managed superfunds. We have termed these ‘nano’ businesses.Australian Small Business and Family Enterprise Ombudsman - Small Business Counts 20196
2Small business share of economic activity2.1Small business numbers2.1.1 Measured by employmentAgainst the ABS definition of a small business (less than 20 employees), small businesses continue toaccount for nearly 98% of all Australian businesses. Since our last report in 2016 the total number ofAustralian businesses has increased 5.5%, with increases across all categories. Small businesses employ2.2 million people. The 3.3 million figure that is often quoted relies on historic Treasury data.Table 1: Business size measured by employmentEmployeesFirm Count0–19 (small)2,259,09820–199 (medium)50,338200 : ABS Counts of Australian Business 8165.0, Table 21 Feb 2019 and ASBFEO calculations (excludes nano businesses with no GST role)The breakdown by small business categories remains steady. The majority of Australian businesses (62%)are sole traders with no employees. Micro business (1-4 employees) account for 27% and small businesses(5-19 employees), 8.5%.Chart 1: Counts of Australian businesses measured by employment size as at June 2018Business count by number of employees2.2%0.2%8.5%0 (non-employing)1–4 (micro)5–19 (small)27.1%62.1%20–199 (medium)200 (large)Source: ABS Counts of Australian Business 8165.0 Table 13, Feb 2019 and ASBFEO calculations (excludes nano businesses with no GST role)Australian Small Business and Family Enterprise Ombudsman - Small Business Counts 20197
2.1.2 Measured by turnoverAgainst the ATO definition of a small business (a turnover of less than 10 million) small businesses accountfor 98.45% of all Australian businesses. More than half of Australian businesses have a turnover of less than 200,000.Table 2: Business numbers by annual turnover in 2017-18TurnoverNo. of businesses 0 to less than 50k572,826 50k to less than 200k792,373 200k to less than 2m787,685 2m to less than 5m92,126 5m to less than 10m32,483 10m or 40%1.55%100.00%Source: ABS Counts of Australian Business 8165.0, Table 17, Feb 2019 and ASBFEO calculations (excludes nano businesses with no GST role)Chart 2: Business count by turnoverBusiness count by turnover 2m to less than 5m3.98% 5m to less than 10m1.40% 200k to less than 2m34.05% 10m or more1.55% 0 to less than 50k24.76% 50k to less than 200k34.25%Source: ABS Counts of Australian Business 8165.0, Feb 2019 and ASBFEO calculations (excludes nano businesses with no GST role)Australian Small Business and Family Enterprise Ombudsman - Small Business Counts 20198
2.1.3 Measured by survivalLooking at the survival of businesses over a four year period indicates the greater the size of a business, thehigher the rate of survival. Survival of non-employing businesses over four years is only 59.6%, which is lessthan the average of 64.5%. This is significantly less than large businesses which have an 85.6% survivalrate. Survival rate percentages in this table have been calculated based on the number of businessesoperating in 2018 divided by the number of businesses of the same size operating in 2014.Table 3: Business survival rates 2014-2018BusinessesEmployment SizeJune 2014Non-employing1,273,769Survived toJune 2018Survival rate%758,92259.61–4 Employees571,206395,95369.35–19 Employees199,965155,27077.620–199 Employees51,61942,40882.2200 Employees3,6033,08485.6Total employing826,393596,71572.22,100,1621,355,63764.5 AverageTotalSource: ABS Counts of Australian Business 8165.0, Table 15. Feb 2019 and ASBFEO calculations.Chart 3: Businesses operating in 2014, surviving to 2018Survival rates of Australian businesses by number of 400,000200,0000Businesses June 2014Survived to June 2018Source: ABS Counts of Australian Business 8165.0, Table 15. Feb 2019 and ASBFEO calculations.Australian Small Business and Family Enterprise Ombudsman - Small Business Counts 20199
2.1.4 Nano businessesThe ATO data set also captures ‘nano’ sized businesses, excluded from the ABS data sets. A nano businessis defined as reporting revenue, but have no GST activity (the mandatory GST registration threshold is 75,000 turnover per annum).The majority of nano businesses file their tax returns as individuals. There has been an increase between2013 and 2016 in the number of small businesses registered as individuals in our datasets (35% in 2013compared to 42% in 2016). Removing GST activity indicates that this growth is largely due to an increase innano business activity, possibly a factor of the ‘gig economy’.Nano businesses are on average roughly one-tenth the size of small businesses with a median turnover(representing the middle amount) of 20,000 in 2016 and a mean turnover (representing the averageamount) of 38,000. These figures show an increase in the median turnover amount between 2013 and2016 but a decrease in the mean. Nano businesses are often secondary business interests to a mainrevenue source.Table 4: Comparison of small and nano business in 2013 and 2016Small BusinessMedian2013Small BusinessMeanNano BusinessMedianNano BusinessMeanTurnover 131,000 368,000 15,000 48,000Net income 16,000 43,000 5,000 22,000Income tax 11,000 1,000 8,000GST 20164,000Small BusinessMedian 11,000Small BusinessMean Nano BusinessMedian Nano BusinessMeanTurnover 125,000 230,000 20,000 38,000Net income 15,000 24,000 7,000 12,000Income tax - 1,000 - 1,000GST 4,000 7,000 - -Source: ATO sample dataset for 2016-17 and ASBFEO calculations. Figures rounded to nearest thousand.Note: A business with no GST activity is generally paying GST on business inputs (input taxed.), small businesses operating as a partnership pays no tax atthe partnership level, rather on individual partners’ level. The same is generally true for businesses operating through a trust – individual beneficiaries ofthe trust are taxed at their individual tax rate. Self-managed superfunds have been excluded from our analysis.2.2Contribution to GDPIndustry value added is the contribution of that industry to gross domestic profit (GDP). Value added is theincrease in the value of goods or services as a result of business activity. On average, small business valueadd continues to increase and represents over one-third of the total value added from industry in 2018.2.2.1 By percentageAs the economy has grown over the last nine years of records, the proportion of total value added by smallbusiness has marginally increased, up from 33.9% in 2008-09 to 34.2% in 2017-18. The rate of increase haskept pace with large businesses, which contributed 42.4% in 2008-09 and 44.2% in 2017-18.Australian Small Business and Family Enterprise Ombudsman - Small Business Counts 201910
Table 5: Value added by business size from June 2013 to June 2018Value added byBusiness size2013-142014-152015-162016-172017-18 m m m m mSmall Business 342,264 375,811 378,400 393,219 413,929Medium Business 233,416 230,601 236,547 250,519 260,971Large Business 462,094 463,512 468,918 490,991 534,065 1,037,774 1,069,924 1,083,865 1,134,730 1,208,964TotalSource: ABS Catalogue No. 8155.0 Australian Industry Table 5 2017-18, May 2019 and ASBFEO CalculationsChart 4: Share of value added by business sizeShare of value addedLarge Business44%Small Business34%Medium Business22%Source: ABS Catalogue No. 8155.0 Australian Industry Table 5 2017-18, May 2019 and ASBFEO CalculationsThe share of value added by small businesses varies markedly between different sectors of the economy.The top five sectors have remained the same since 2013-14, led by agriculture, forestry an
This report outlines the research and findings on small business statistics. Due care has been exercised in the . Australian Small Business and Family Enterprise Ombudsman- Small Business Counts 2019 4 . Foreword . Australia is a nation of small businesses - the engine room of the ec
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