Small Business and Independent Contractors Fact Sheet 

Small business

Definition

Small businesses, as defined by the Australian Bureau of Statistics[1], are those with less than 20 employees[2].

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). [3] (2007)

According to the 2010–11 Federal Budget and the ATO, there are approximately 2.4 million businesses having a turnover of less than $2m in Australia [4].

Sizes of businesses

Around 61 per cent (1,171,832) of small businesses are non-employing businesses, 27 per cent (527,445) employ between one and four people, and 12 per cent (228,313) employ five to 19 people. [5] (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. [6]

Economic contribution

Small business forms a vital part of the Australian economy, contributing around 34 per cent of private industry value added in 2008–09. [7]

Exports

Approximately 16,540 small exporters shipped goods to the value of $1.2 billion in 2008–09. This represents 38 per cent of all goods exporters and 0.5 per cent of the total value of all goods exported. [8]

Employment

Small businesses provided employment for almost 4.8 million people as at June 2009, accounting for around 48 per cent of private sector employment, which totalled 10.0 million people at June 2009. [9]

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. [10]

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. [11]

Home operators

Around 67.5 per cent of all small businesses are home based (ie. operated either from home or at home). [12] 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). [13]

Computers, the internet and eCommerce

Around 97 per cent of small businesses own a computer. Ninety five per cent of small businesses are connected to the internet with a further one per cent expecting to connect their businesses to the internet within the next 12 months. Of the small businesses reporting connections to the internet, around 95 per cent had broadband access. Seventy eight per cent used the internet to place orders, 71 per cent received payments over the internet, 60 per cent took orders over the internet, and 57 per cent of small businesses have a website (May 2009). [14]

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. [15]

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. [17]

Number of small business operations

In June 2006, 92 per cent of all small business operators operated one business, six per cent operated two businesses and two per cent operated three or more businesses. [18]

Interest rates on small business loans

The RBA left the official cash rate target unchanged at 4.50 per cent in August 2010, following the most recent increase of 25 basis points to 4.50 per cent in May 2010:

• 3 September 2008—down by 25 basis points
• 8 October 2008—down by 100 basis points
• 5 November 2008—down by 75 basis points
• 2 December 2008—down by 100 basis points
• 4 February 2009—down by 100 basis points
• 8 April 2009—down by 25 basis points
• 7 October 2009—up by 25 basis points
• 4 November 2009—up by 25 basis points
• 2 February 2010—unchanged
• 2 March 2010—up by 25 basis points
• 6 April—up by 25 basis points
• 4 May—up by 25 basis points

The chart below compares the RBA’s small business indicator lending rates (residentially secured) with the RBA cash rate target. [19]

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

Source: RBA.

Published data from September 2008 to September 2009 suggest that banks have passed through approximately 70 per cent of cash rate target reductions (3.00 percentage points out of 4.25 percentage points – including the first reduction in September 2008). Published data from October 2009 to July 2010 suggest that banks have passed through 100 per cent of cash rate target increases (1.50 percentage points out of 1.50 percentage points). The four major Australian banks left small business variable lending rates unchanged in both June, July and August, after having fully passed on the May 2010 increase in the cash rate target.

Key Independent Contractor Facts

Definition

The Australian Bureau of Statistics (ABS) defines independent contractors as people who operate their own business and who contract to perform services for others without having the legal status of an employee. [20]

Size of the sector

In November 2009, there were over 1 million people who worked as an independent contractor in their main job. This represents 9.6 per cent of Australia’s workforce (10,664,900). [21]

The following data relates to people who worked in November 2008 as an independent contractor in their main job.

Gender breakdown

75 per cent of independent contractors were male. [22]

Sectors

The main sectors that independent contractors worked in were the construction industry (33 per cent), and the professional, scientific and technical services industry (15 per cent). [23]

Sectors (Gender)

Male independent contractors are more likely to work in the construction industry (41 percent), whereas female independent contractors were most likely to work in the professional, scientific and technical services industry (20 percent).  As for occupation groups, (37 percent) of males were employed as technicians and trades workers, and (33 percent) of females were employed professionals. [24]

Age

For both men and women, the 35 -54 year age group accounted for more than half of all independent contractors, 51% and 56% respectively. [25]

Employees

20 per cent of independent contractors had employees. [26]

Control

57 per cent of independent contractors had authority over their own work. 68 per cent had the ability to sub-contract their own work. [27]

Multiple Contracts

47 per cent of independent contractors were working under multiple contracts. [28]

Location

References

1. Under some circumstances turnover ranges have been used to define the size of a business. The Australian Tax Office (ATO) defines a ‘small business’ as having a turnover less than $2m.
2. ABS Small Business in Australia 2001 – 1321.0, p 1
3. ABS Counts of Australian Businesses, Including Entries and Exits, June 2003 to June 2007 – 8165.0, Table 13 p 18.
4. Detailed published disaggregated data in this ATO defined category is not available–unlike the ABS business count data above (such as number of small businesses by industry or by region). The ABS collects data for the size of small business turnover and estimates there are 1.89 million small businesses under this turnover definition.
5. ABS Counts of Australian Businesses, Including Entries and Exits, June 2003 to June 2007 – 8165.0, Table 13 p 18.
6. ABS Counts of Australian Businesses, Including Entries and Exits, June 2003 to June 2007 – 8165.0, Table 13 p 18.
7. DIISR estimate based on ABS Australian Industry 2008–09 – 8155.0, Table 2.1, p 23
8. ABS Number and Characteristics of Australian Exporters, 2008–09 – 5368.0.55.006, Table 5, p 12.
9. ABS Australian Industry 2008–09 – 8155.0, Table 2.1, p 23
10. ABS Counts of Australian Businesses, Including Entries and Exits, June 2003 to June 2007 – 8165.0, Table 13 p 18.
11. ABS Australian Small Business Operators – Findings From the 2005 and 2006 Characteristics of Small Business Surveys, 12. 2005–06, released 6 August 2008. 8127.0
12. ABS Characteristics of Small Business 2004 – 8127.0, p 70.
13. ABS Characteristics of Small Business 2004 – 8127.0, p 72.
14. Sensis E-Business Report August 2009 (conducted May 2009), p 6, 10, 11, 12, & 14.
15. MYOB Australian Small Business Survey Special Focus Report, December 2008, p 31.
16. ABS Counts of Australian Business Operators 2006–07 – 8175.0, Table 2.6 p 22.
17. ABS Counts of Australian Business Operators 2006–07 – 8175.0, Table 2.2 p 20.
18. ABS Australian Small Business Operators – Findings From the 2005 and 2006 Characteristics of Small Business Surveys,    2005–06, released 6 August 2008. 8127.0
19. RBA Bulletin, Table F05, accessed 22 July 2010.
20. ABS Forms of Employment, Australia, November 2008, Released 12 June 2009, 6359.0, p. 3
21. ABS Forms of Employment, Australia, November 2009, Released 29 April 2010, 6359.0, p. 11
22. ABS Forms of Employment, Australia, November 2009, Released 29 April 2010, 6359.0, p. 6
23. ABS Forms of Employment, Australia, November 2009, Released 29 April 2010, 6359.0, p. 7
24. ABS Forms of Employment, Australia, November 2009, Released 29 April 2010, 6359.0, p. 7
25. ABS Forms of Employment, Australia, November 2009, Released 29 April 2010, 6359.0, p. 6
26. ABS Forms of Employment, Australia, November 2009, Released 29 April 2010, 6359.0, p. 32
27. ABS Forms of Employment, Australia, November 2009, Released 29 April 2010, 6359.0, p. 32
28. ABS Forms of Employment, Australia, November 2009, Released 29 April 2010, 6359.0, p. 32
29. ABS Forms of Employment, Australia, November 2009, Released 29 April 2010, 6359.0, p 36. Numbers in the table may not sum to totals due to rounding.