What Is a Small Business in Australia?

There are more than 2.2 million small businesses in Australia. But what is the Australian definition of a small business?

Turns out it’s not that easy to answer.

Small business definition

A small business is a business that has 0 to 19 employees, excluding the business owner(s) or partners. [Reference: Australian Bureau of Statistics — ABS]

Though this definition of small business is quite straightforward and most widely used, this is not the only definition used in Australia.

Here are a few other official definitions that you should know about.

Small business definition by Fair Work Commission of Australia

A small business is a business that has 0 to 14 employees. [Reference: FWC]

Small business definition by Australian Securities and Investments Commission

A small business is a business that meets at least two of the following three conditions at the end of a financial year -

• It has 0 to 99 employees
• It has less than A$50 million annual revenue
• It has less than A$25 million consolidated gross assets

ASIC adopted this definition on 1 July 2019. [Reference: ASIC]

Small business definition by Australian Taxation Office

A small business is a business that has less than A$10 million aggregated turnover in a year (excluding GST). [Reference: ATO]

Types of small business in Australia

If we take the ABS definition of small business as our standard, then small businesses can be classified into the following categories -

1. Non-employing business:
These are sole traders and partnerships with no employees.

2. Micro-business:
These businesses have 0 to 4 employees.

3. Other small businesses:
These businesses have 5 to 19 employees.

Note 1:
By definition, micro-businesses also include non-employing businesses. This makes category 1 redundant. However, ABS shows non-employing businesses in a separate category.

Note 2:
Some agricultural businesses may have a large number of seasonal employees with a relatively low number of permanent employees, making them appear as small businesses. So, ABS uses a different definition in these cases.

Types of businesses in Australia based on the number of employees

The following chart will make it easier to understand how ABS classifies businesses by size and where small businesses stand in this classification.

Definition of SMEs in Australia

Small and medium-sized enterprises (SMEs) are businesses that have 0 to 199 employees. The terms SME and SMB are often used interchangeably. SMBs stands for Small and medium-sized businesses.

Conclusion

According to the 2019 Small Business Counts report, there are more than 2.2 million small businesses in Australia. In other words, 97.7% of Australian businesses are small businesses.

More than 60% of these businesses are sole traders with no employees, and 50% have a turnover of less than A$200k.

However, small businesses play a crucial role in Australia’s economy, employing 44% of the country’s total workforce. Small business owners will continue to play this role in the upcoming years.

Originally published at https://brightsmall.com on October 1, 2020.