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 to gross domestic product
Small business forms a vital part of the Australian economy, contributing around 35 per cent of GDP 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, 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
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
23 per cent of small business owners estimate they work 41 to 50 hours in a typical working week.
25 per cent of small business owners estimate they work 51 to 70 hours in a typical working week.
8 per cent of small business owners estimate they work over 70 hours in a typical working week. 46 per cent of small business owners work 6 or 7 days in a typical working week.
34 per cent of small business owners work more than 10 hours per day 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 conducted
In June 2006, 92 per cent of all small business operators conducted 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 cut the official cash rate target by a total of 2 per cent over the past three months:

• 3 September 2008—a reduction of 25 basis points
• 8 October 2008—a reduction of 100 basis points
• 5 November 2008—a reduction of 75 basis points.

As at 24 November, the four major banks had reduced their small business indicator rates on residentially secured term loans by an average of 70 basis points in response to the 125 basis point cash rate target reduction by the RBA (25 basis points in September and 100 basis points in October). It is too early to tell how the indicator lending rates will respond to the November cash rate target reduction of 75 basis points. ¹⁷ The table below shows the known reductions in indicator lending rates to date. ¹⁸

Source: RBA Bulletin

The following supplementary information has been provided directly by the individual banks:

• CBA reduced their lending rates by between 0.53 per cent and 0.65 per cent across all of their business loans products after the October cash rate target cut. Business rates following the November reduction are currently under review.
• NAB’s business bill-based loan customers (which represent the majority of NAB’s lending to business and agribusiness customers) will automatically receive the full benefit of the reduction in bank bill rates. In addition, variable business lending rates were revised by -0.25 per cent on 22 September, -0.20 per cent on 20 October, and -0.40 per cent on 5 November.
• Westpac Bank has reduced interest rates on a range of business loans by 0.80 per cent following the October cash rate target cut—effective 13 October. Westpac also reduced interest rates on business credit cards by up to 0.80 per cent in response to the November reduction—effective 14 November 2008. Business loan rates are currently under review.
• ANZ Bank reduced business lending rates by 0.60 per cent on 27 October. ANZ then reduced variable business loan rates by between 0.40 per cent and 0.50 per cent, effective 24 November.

Independent Contractors

Number of independent contractors and growth
The Productivity Commission estimates that there were 787 600 self-employed contractors in Australia in 2004 (the latest available data). This was fewer than in 1998, when there were 843 900 independent contractors.

Employment by industry
In 1998 (the latest available data) industries accounting for significant employment of self employed contractors were the construction industry, especially housing (almost 25 per cent); computer services (19.7 per cent); transport industry (5.4 per cent) and the manufacturing industry (8.6 per cent).

Occupational distribution
Most significant occupations for self employed contractors are tradespersons and related workers (27 per cent); professionals (18.3 per cent); intermediate production (10.6 per cent); transport workers (10.6 per cent) and labourers (10.6 per cent).

Data issues
The Australian Bureau of Statistics has consulted key stakeholders, including Independent Contractors Australia, on the design of a new survey on contract work and labour hire. ABS has advised that the survey is expected to commence in 2008 or 2009 and will be undertaken every three years.

 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 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 2006–06, 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, July 2008, p 22 – 24.
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. Email communication with the RBA
18. RBA Bulletin, Table F05, released 20 November 2008