What is small business?
Answer
Privately owned businesses with few employees
Explanation
A small business in Australia is a privately owned business with fewer than 20 employees (the Australian Bureau of Statistics definition) or fewer than 15 employees (the Fair Work Act 2009 definition for small business workplace law). About 2.5 million small businesses operate across Australia, employing about 5.1 million people and producing about one-third of total private-sector economic output.
Starting a small business involves several steps. The owner chooses a business structure (sole trader, partnership, company, or trust), each with different tax and liability implications. They register for an Australian Business Number (ABN) through the Australian Business Register, which is free and usually issued instantly. If the business will have annual turnover of 75,000 dollars or more, they register for GST through the ATO. Companies are registered through the Australian Securities and Investments Commission (ASIC) and receive an Australian Company Number (ACN). Trading names, separate from the legal entity, are also registered through ASIC.
Small businesses face a complex regulatory environment but also receive substantial support. Tax benefits include the small business income tax offset (worth up to 1,000 dollars a year for sole traders), the instant asset write-off (allowing immediate deduction of assets up to 20,000 dollars per asset for businesses with turnover under 10 million dollars, as of 2024-25), simplified GST and BAS reporting on cash basis, and concessional tax rates on capital gains from active business assets. Free advice is available from business.gov.au, state-based Business Australia services, and Apprenticeship Network providers.
Specific obligations apply once the business has employees. The employer must register for PAYG withholding through the ATO, pay the superannuation guarantee (currently 12 per cent), provide workers' compensation insurance (purchased from the relevant state insurer), comply with the Fair Work Act and any applicable modern award, report wages through Single Touch Payroll, issue Fair Work Information Statements to new employees, and lodge an annual ATO return. The 15-employee threshold under the Fair Work Act gives small businesses a longer minimum employment period before unfair dismissal rights kick in (12 months rather than six) and access to the Small Business Fair Dismissal Code.
Why this matters for your test
Small business is a major part of the Australian economy and a path many new citizens follow into self-employment, and recognising the ABN, GST threshold, and ATO/ASIC roles helps new business owners set up correctly.
Source: Australian Citizenship: Our Common Bond (2024)
