It is pointed, opinionated, and creates curiosity without sounding like a partisan attack. It allows you to argue that payroll tax, super changes, wage increases and investment policy changes are collectively increasing pressure on SMEs while still sounding like a concerned economic observer rather than a political campaigner.
I have always been fascinated by economics, business and the numbers that shape our society.
As a kid, I would read newspaper articles about interest rates, house prices and government policy while most people my age were focused on sport. Today, I still find myself paying close attention to economic data, business trends and the decisions being made in Canberra because those decisions eventually affect every Australian household.
Lately, one theme keeps appearing wherever I look.
Whether it is reading business news, watching interviews with entrepreneurs, following industry leaders on LinkedIn or listening to small business owners talk about their challenges, the message is becoming increasingly consistent.
The pressure on Australian small and medium businesses is building.
Not because of one policy.
Not because of one wage increase.
Not because of one economic challenge.
But because of the cumulative impact of rising costs, increasing regulation, growing administrative burdens and an economy that is becoming more difficult to navigate for the very businesses that employ millions of Australians.
And that concerns me.
Because small and medium businesses are not just another segment of the economy. They are the engine room that keeps Australia moving.
The growing pressure on Australian small businesses
Small and medium-sized enterprises (SMEs) are the backbone of Australia’s economy.
They are the local café owner employing students on weekends. The family-owned manufacturer providing apprenticeships. The trades business employing electricians, plumbers and technicians. The retailer sponsoring the local football club.
Collectively, SMEs employ around 68% of Australia’s private sector workforce, representing more than seven million Australians.
When small businesses succeed, Australia succeeds.
When they struggle, the consequences ripple through every community in the country.
The problem is that the financial pressure being placed on these businesses continues to grow from every direction.
In recent years businesses have absorbed:
- Freight cost increases of up to 75%
- Significant rises in electricity and energy costs
- Persistent inflation
- Higher interest rates
- Supply chain disruptions
- Increased insurance premiums
- Rising compliance and reporting requirements
Many business owners have accepted these challenges because that is what entrepreneurs do. They adapt, innovate and find a way forward.
But there comes a point where there is simply no more room to absorb additional costs.
The 4.75% minimum wage increase doesn’t exist in a vacuum
The recent 4.75% minimum wage increase has been welcomed by many workers who are also feeling cost-of-living pressures.
That is understandable.
But we must also acknowledge that wage increases do not occur in isolation.
For employers, every wage increase sits on top of a range of existing employment costs.
Before a single dollar of additional wages is paid, businesses are already covering:
- Superannuation
- Workers compensation insurance
- Payroll tax (where applicable)
- Leave entitlements
- Training costs
- Recruitment costs
- Compliance obligations
In many cases, these on-costs can add more than 20% to the actual wage bill.
A 4.75% wage increase is not simply a 4.75% increase in business costs.
The true impact is considerably higher.
For large corporations with significant resources, that may be manageable.
For a local business operating on thin margins, it can be the difference between hiring another employee and not hiring at all.
Payroll tax sends the wrong message
One policy in particular deserves greater scrutiny.
Payroll tax.
Think about what it actually does.
The more people you employ, the more tax you pay.
The more jobs you create, the greater your tax burden becomes.
At a time when Australia needs stronger productivity, investment and employment growth, we have a tax that effectively penalises businesses for expanding their workforce.
That seems fundamentally backwards.
If governments genuinely want more employment opportunities, particularly in regional and suburban communities, we should be asking whether payroll tax is helping or hindering that objective.
Entrepreneurs and business owners create jobs because they see opportunities for growth.
Government policy should encourage that behaviour, not discourage it.
More changes are coming
The pressure does not stop there.
From 1 July, employers will face changes requiring more frequent superannuation payments, moving towards payday-style super processing.
While the objective of getting superannuation into workers’ accounts faster is understandable, the reality for many small businesses is additional administration and tighter cash flow management.
For large organisations with dedicated payroll departments, this may be relatively straightforward.
For smaller operators already juggling staffing, customers, suppliers, compliance and cash flow, it is another burden added to an already full plate.
The question policymakers should always ask is simple:
What is the cumulative impact of all these changes when combined?
Too often, reforms are considered individually.
Businesses experience them collectively.
The AI factor nobody wants to discuss
What worries me most is not what happens today.
It is what happens over the next five years.
Businesses can only absorb so much.
Eventually, they begin looking for alternatives.
Historically, that might have meant reducing expansion plans or delaying recruitment.
Today, there is another option.
Automation.
Artificial intelligence is rapidly changing the economics of labour-intensive tasks.
Customer service.
Administration.
Content creation.
Bookkeeping.
Data processing.
Marketing.
Analysis.
Many of these functions can now be partially automated at a fraction of the cost they once required.
When the cost of employing people rises faster than productivity, businesses naturally look at technology as an alternative.
This is not because employers are anti-worker.
It is because survival comes first.
The risk is that policymakers continue increasing the cost of employment without considering how rapidly automation is advancing.
The unemployment statistics may not reflect that immediately.
But over time, the trend becomes difficult to ignore.
We should be rewarding job creation
I believe there is a better approach.
Instead of viewing business as something that needs to be regulated at every turn, we should recognise the role it plays in creating prosperity.
Businesses fund economic growth.
Businesses create employment.
Businesses train apprentices.
Businesses invest in innovation.
Businesses support communities.
Businesses pay taxes.
Rather than penalising employers for growing their workforce, we should be rewarding them.
As entrepreneurs such as Janine Allis and many others have argued, it may be time to rethink payroll tax entirely.
More importantly, it may be time to create policies specifically designed to encourage job creation.
What I think businesses need:
If we are serious about supporting Australian jobs and economic growth, I believe several measures deserve consideration:
1. Abolish or fundamentally restructure payroll tax
Tax systems should encourage employment growth, not discourage it.
2. Introduce tax incentives for businesses that increase headcount
Reward businesses that create jobs and invest in people.
3. Defer or financially support the transition to more frequent superannuation processing
Allow SMEs time to adapt without creating unnecessary cash flow stress.
4. Require cumulative cost-impact assessments
Before introducing any new employment regulation, governments should assess the combined financial impact on businesses already managing existing obligations.
Business is not the opposition
There is an unfortunate tendency in political debate to frame business owners and workers as though they sit on opposite sides.
In reality, they need each other.
Without businesses, there are no jobs.
Without employees, businesses cannot grow.
The overwhelming majority of Australian business owners are not corporate giants.
They are ordinary Australians taking risks, creating opportunities and trying to build something meaningful.
They are not the opposition.
They are the engine room of the Australian economy.
And if we continue increasing the cost and complexity of employing people without considering the cumulative consequences, we risk damaging the very system that creates jobs in the first place.
Australia thrives when business thrives.
It is time our policies reflected that reality.
