Small Business and Independent Contractors Fact Sheet 

Small business

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

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  (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 35 per cent of private industry value added in 2006–07.⁵  (These figures exclude economic production from the ANZSIC 2006 Financial and Insurance Services and Public Administration and Safety sectors due to technical issues with data collection and processing.)

Exports
16 555 small exporters shipped goods to the value of $1.1 billion in 2006–07. 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 3.8 million people in 2005–06, accounting for around 46 per cent of private sector employment, which was 8.4 million people at June 2006.⁷  (These figures exclude small business employees in the ANZSIC 1993 Finance and Insurance and Government Administration and Defence sectors due to technical issues with data collection and processing.)

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 ninety-seven 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

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.

The table below shows the announced reductions in the relevant interest rates by the four major banks, as well as the RBA indicator lending rates.¹⁷  These rate reductions relate to residentially secured small business loans.

All of the four major banks have or intend to pass through the most recent 100 basis point RBA cash rate target cut in February 2009.

There is no official published data yet on changes in indicator lending rates following the February cash rate target reduction.

Table: Per cent changes in small business residentially secured lending rates (RSLR) by the four major banks in response to changes in the RBA cash rate target.

Source: RBA, ANZ, CBA, Westpac, NAB

On the basis of published data from September 2008 to December 2008, banks have therefore passed through 58 per cent of cash rate target reductions (1.75 per cent out of 3 per cent). During the period September 2008 to February 2009, the four major banks have passed through between 60 per cent and 73 per cent of cash rate target reductions.
The table below shows the RBA's cash target rates versus the published RBA small business indicator rates.

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

Source: RBA.

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.  The expected release date is 27 May 2009.

The latest available data on the number of independent contractors is from the Productivity Commission, who estimate that there were 787 600 self-employed contractors in Australia in 2004.¹⁹ An estimate of 843 900 self-employed contractors was calculated in 1998.

[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 2006–07 – 8155.0, Table 2.1, p 17.

[6] ABS Number and Characteristics of Australian Exporters, 2006–07 – 5368.0.55.006, p 6.

[7] ABS Australian Industry 2005–06 – 8155.0, Table 2.1, p 34.

[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, released 7 January 2009; and DIISR communication with individual banks. 

[18] Productivity Commission, The Role of Non-Traditional Work in the Australian Labour Market, May 2006

[19] Productivity Commission, Self-Employed Contractors: Incidence and Characteristics, February 2002