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8165.0 - Counts of Australian Businesses, including Entries and Exits, Jun 2007 to Jun 2009 Quality Declaration 
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 21/10/2010   
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This document was added 12/21/2010.



EXPLANATORY NOTES

INTRODUCTION

        This publication presents counts of businesses based on snapshots of actively trading businesses as at June 2007, 2008 and 2009 from the Australian Bureau of Statistics Business Register (ABSBR). This publication contains counts and rates of business entries and exits from the Australian economy as well as counts and rates pertaining to the survival of businesses.

        The scope of Counts of Australian Businesses, including Entries and Exits, June 2007 to June 2009 (cat. no. 8165.0) is significantly different to previously released (and discontinued) ABS business counts publications. In particular, this publication only includes businesses which actively traded in goods or services during the reference period in question, whereas the scope of previous releases focused on different populations. Please refer to section entitled "Scope" and Appendix 1 for further information.

        The results of these studies are based, in part, on tax data supplied by the Australian Taxation Office (ATO) to the ABS under provisions in various Taxation Acts which require that such data are only used for statistical purposes. No individual information collected under the Census and Statistics Act 1905 is provided back to the ATO for administrative or regulatory purposes. Any discussion of data limitations or weaknesses are in the context of using the data for statistical purposes, and are not related to the ability of the data to support the ATO’s core operational requirements.

        Legislative requirements to ensure privacy and secrecy of these data have been followed. Only people authorised under the Australian Bureau of Statistics Act 1975 have been allowed to view data about any particular organisation and/or person in conducting these analyses. No information about individual taxpayers (persons) has been released to the ABS. Aggregated personal income tax data are confidentialised by the ATO before release to the ABS. In accordance with the Census and Statistics Act 1905, results have been confidentialised to ensure that they are not likely to enable identification of a particular person or organisation.

        The Explanatory Notes which follow contain further information about the collection methods used in compiling Counts of Australian Businesses, including Entries and Exits. This includes information about the data source used and processes or transformations which have been applied to the data.

DATA SOURCE
        Most businesses in Australia need to obtain an Australian Business Number (ABN). These businesses are then included on the whole-of-government register of businesses, the Australian Business Register (ABR), which is maintained by the ATO. Information about the ABR can be obtained from the ABR website <www.abr.gov.au> or the ATO website <www.ato.gov.au/business>. The ABS uses information from the ABR to populate its internal register of businesses, the Australian Bureau of Statistics Business Register (ABSBR), which is used as a source for business survey frames and business counts.
STATISTICAL UNIT
        In mid 2002, the ABS commenced sourcing its register information from the ABR and at that time changed its business register to a two population model. The two populations comprise what is called the profiled population and the non profiled population (formerly known as the ABSMP and the ATOMP). The main distinction between businesses in the two populations relates to the complexity of the business structure and the degree of intervention required to reflect the business structure for statistical purposes.

        The vast majority of businesses included on the ABS Business Register are in the non profiled population. Most of these businesses are understood to have simple structures and the unit registered for an ABN satisfies ABS statistical requirements (after some system processes are applied). For these businesses, the ABS statistical units structure directly aligns with the ABN unit: one ABN equates to one business.

        For a relatively small number of businesses, the ABN unit is not suitable for ABS economic statistics purposes and the ABS maintains its own units structure through direct contact with businesses. These businesses constitute the profiled population. This population consists typically of large, complex and diverse groups of businesses. In the profiled population, a type of activity unit (TAU) equates to one business.

        The TAU is comprised of one or more business entities, sub-entities or branches of a business entity within an enterprise group that can report production and employment data for similar economic activities. When a minimum set of data items are available, a TAU is created which covers all the operations within an industry subdivision. Where a business cannot supply adequate information for each industry, a TAU is formed which contains activity in more than one industry subdivision. These TAUs are classified according to the industry subdivision of the main activity. TAUs may have operations in one or more states/territories.

        The statistical unit referred to as a "business" thus consists of ABNs from the non profiled population and TAUs from the profiled population.

SCOPE
        Counts of businesses produced from the ABSBR comprise actively trading businesses in the Australian economy. Actively trading businesses are:

        • TAUs from the profiled population (where activity is monitored by direct contact by ABS); and
        • ABNs from the non profiled population which are actively remitting in respect of a Goods and Services Tax (GST) role.

        Limiting the scope to only businesses with a GST role means that only entities which are actively trading in goods or services are included. Businesses which have not submitted a Business Activity Statement (BAS) and/or have reported zero dollar amounts over five consecutive quarters are treated as "long term non-remitters" (LTNRs). As they are not actively remitting GST, they are considered not to be actively trading and are therefore excluded from counts.

        In addition, entities which are not considered to be actively trading in the market sector are not considered to be businesses and, as such, are excluded from the business counts. This includes entities classified to the following categories:

        • Standard Institutional Sector Classification of Australia (SISCA) 2006:
          • 2110 Reserve Bank of Australia;
          • 2120 Other Central Bank Institutions;
          • 3000 General Government;
          • 5000 Non-Profit Institutions Serving Households; and
          • 6000 Rest of the World.
        • Type of Legal Organisation (TOLO):
          • 12 Charitable Institution;
          • 15 Social and Sporting Clubs;
          • 16 Trade Unions and Other Associations;
          • 20 Other Unincorporated Entity;
          • 41 Diplomatic or Trade Missions; and
          • 42 Other Foreign Government.
        • ANZSIC 2006 Subdivision:
          • 7711 Police Services;
          • 7713 Fire Protection and Other Emergency Services;
          • 9540 Religious Services;
          • 9551 Business and Professional Associations;
          • 9552 Labour Association Services;
          • 9559 Other Interest Group Services n.e.c.;
          • 9601 Private Households Employing Staff;
          • 9602 Undifferentiated Goods-Producing Activities of Private Household for Own Use; and
          • 9603 Undifferentiated Service-Producing Activities of Private Household for Own Use.
        The exclusion of the General Government Institutional Sector particularly impacts on counts for the Public administration and safety, Education and training and Health care and social assistance ANZSIC 2006 divisions (ANZSIC 2006 Divisions O, P and Q, respectively). This focusses the business counts in these divisions on private sector activity only.

        It should be noted that the scope of the business counts has been redefined in this release using the updated 2006 versions of SISCA and ANZSIC.

        In relation to SISCA, the scoping changes have been relatively minor. Specifically, the SISCA 1993 "Central Bank" category (which was out of scope in previous releases) has been split into two categories, "Reserve Bank of Australia" and "Other Central Bank Institutions". These SISCA 2006 categories are out of scope of this release and have had a negligible impact on the counts.

        In relation to ANZSIC, business counts which were previously provided according to ANZSIC 1993 have been updated to ANZSIC 2006. For further information regarding the transition from using data on the ANZSIC 1993 basis to using data on the ANZSIC 2006 basis, please refer to the section below entitled "Industry".

        In addition, the scope for business counts has been expanded in this release to include those businesses that are yet to be coded by the ATO to an industry, sector and/or main State of operation through the Australian Business Register (ABR) new business registration process. Historically, due to the statistically insignificant size of the population, such businesses were excluded from the scope of Counts of Australian Businesses, including Entries and Exits.

        Analysis conducted on these businesses indicates that, despite not having a complete set of characteristics data, these businesses were actively trading and also met the other scoping criteria of the collection (please refer to the diagram on page 3 for further details). It was therefore considered appropriate that they be included within scope of Counts of Australian Businesses, including Entries and Exits.

        These actively trading businesses have been grouped together into "currently unknown" codes in the publication tables and the forthcoming data cubes. The inclusion of these businesses in Counts of Australian Businesses, including Entries and Exits will provide a more accurate annual snapshot of businesses that were actively trading in the Australian economy.

COVERAGE
        There are actively trading businesses which have not registered for an ABN, either because they do not have any obligations under the Goods and Services Taxation (GST) legislation or are under the threshold for registration and have chosen not to register. However, these businesses have not been identified and quantified and are not included in counts presented in this publication.
COMPARABILITY WITH FRAMES FOR ABS SURVEYS
        The basis for business counts in this release is broadly consistent with that used for frames in most ABS business surveys. There are two exceptions to this:

        • The scope with regard to industry, sector or type of legal organisation can vary according to the requirements of the survey. In some cases, classifications excluded from these business counts are included in a survey frame in order to more comprehensively measure a particular part of the economy. Other survey frames may only include a subset of these classifications such as excluding businesses with invalid ANZSIC codes. Most frames currently include employing businesses only.
        • Most survey frames include entities with a tax role to withhold income tax from their employees (ITW role) but without a GST tax role. There are approximately 45,000 such entities. Investigations indicate that units with an ITW role but no GST role are likely to be part of a complex business structure. Such entities are excluded from these counts as they are not considered to be actively trading in goods and services. For business surveys designed to, amongst other things, provide estimates of wages and salaries paid (irrespective of whether the entity is actively trading or not), it is important that these entities are included on frames.
REFERENCE PERIOD
        Counts of businesses provided in the Counts of Australian Businesses including Entries and Exits suite of products are based on annual (financial year) snapshots of the ABSBR from 1 June 2007 to 1 June 2009 (inclusive) and also reflect changes and continuity between those periods.
TIME SERIES
        The data presented in this publication were produced on a similar conceptual basis to the data included in previous publications. In terms of time series, at an aggregate level (where industry and annual turnover detail is not present), data comparability is considered high between this and previous publications. Please refer to the section entitled "Scope" for further information.

        However, users should exercise caution when making data comparisons between this publication and either of the two previous publications. Specifically, any publication tables, data cubes or customised data containing ANZSIC 1993 industry detail and annual turnover size ranges from previous releases will not be directly comparable with the data included in this publication.

        With the change in the GST threshold from 1 July 2007, and the transition to counts based on ANZSIC 2006, it has been necessary to rebase the time series to June 2007. This is to ensure a consistent GST threshold is in place for the entire reference period.

        ANZSIC 2006 information is not available for businesses which were active after June 2003 but exited prior to July 2006. Further, industry coding of new businesses using ANZSIC 1993 ceased in April 2006. Therefore, businesses passing through the ATO business registration processes after April 2006 are no longer being allocated ANZSIC 1993 industry codes. This rules out the possibility of developing an accurate and ongoing time-series based on ANZSIC 1993 in Counts of Australian Businesses, including Entries and Exits. This publication therefore establishes a new industry-based time-series, based on the same version of ANZSIC currently used by the ATO during the business registration process. This will also allow for a more relevant range of industry-based time-series data to be developed in future.

BUSINESS EVENTS
        This release contains not only snapshots of counts of active businesses at regular points in time but also provides a disaggregation of these counts to enable the identification of the flows of businesses into and out of the economy and a measure of the length of time that businesses continue to survive. These data assist to provide a point-in-time "snapshot" of those businesses that are entering and exiting the Australian economy, as well as those businesses that continue to survive. For further information, please refer to the publication's Technical Note.

        Business entry and exit counts are restricted to new or ceasing businesses. In particular, entries do not include the establishment of new locations associated with an existing business.

Entries
        A business entry event is the registration of a new business for an ABN and the allocation of a GST role, or the allocation of a GST role to an existing ABN which previously did not have this role.

        This also includes businesses which had:

        • Their ABN or GST role cancelled and subsequently recommenced activity under their original ABN and GST role; or
        • Ceased remitting BAS for at least five successive quarters (LTNRs) but had recommenced remitting prior to the next reference period.

        Thus, a business entry is defined as a business which is actively trading on the business register at 1 June in the reference year but was not actively trading at 1 June the previous year.
Exits
        A business exit event is the cancellation of a business's ABN or GST role and/or when a business ceases to remit GST for at least five consecutive quarters in respect of that ABN.

        Thus, a business exit is defined as a business which was actively trading on the business register at 1 June in the previous year but was not actively trading at 1 June in the reference year.

        It is important to note that a business exit event does not necessarily equate to a business "failure". There may be a number of other reasons why a business exit event has occurred, including events relating to selling a business (e.g. due to an owner/operator retiring), and events relating to changes in a business's structure (e.g. due to merger or takeover activities), etc. Such events may result in one or more business exit events occurring, and in some cases, no net loss of businesses.

Survivals
        A surviving business is defined as a business which is active on the ABSBR at 1 June of the current year and was also active in the previous year. In this release, two types of survivors are recorded:

        • Businesses that were on the ABSBR at 1 June 2007. Due to the changed basis of the ABSBR in 2003, the ABS has determined that it is not feasible to ascertain the age of these businesses. The survival of these businesses is measured in terms of whether they were still on the ABSBR at 1 June 2008 and 1 June 2009, respectively.
        • Businesses that were entries in 2007-08. That is, they were not on the ABSBR at 1 June 2007 but were on 1 June 2008. The survival of these businesses is measured in terms of whether they were still on the ABSBR at 1 June 2009.

        One of the enhancements to the business counts data in this publication involves the provision of data which indicates the growth and movement of business survivals between employment and annual turnover classifications over time. For further information, please refer to the publication's Technical Note.
INTRA-YEAR ENTRIES AND EXITS
        It is possible that a business can enter after 1 June in a given year and exit before 1 June in the following year. A small number of these instances occur in any given year. This release excludes those instances in order to assist interpretation of results.
DATA QUALITY
        The counts in this publication are subject to non-sampling error and the cyclical administrative workflows of the ATO may impact on data interpretability. The counts are not subject to sampling error as they represent a complete enumeration of those "economically active" businesses on the ABSBR. For further information on this, and other likely sources of error in this release, please refer to the data quality declaration associated with Counts of Australian Businesses, including Entries and Exits (cat. no. 8165.0).
A COMPREHENSIVE COUNT OF ALL ECONOMICALLY ACTIVE ENTITIES
        Ideally, the ABS would capture all economically active entities in Australia. These would then be split by actively trading businesses and other entities. However, it is not possible to accurately capture all such entities at this stage as there are a number of options open to these entities with regard to registration or participation in the tax system. Using existing data sources, only partial coverage of these entities is possible and it is not possible to quantify the extent of this partial coverage.
INDUSTRY
        Each ABN unit or TAU on the ABSBR has been classified (by the ATO and the ABS respectively) to a single ANZSIC 2006 industry class, irrespective of any diversity of activities undertaken. The industry class allocated is the one which provides the main source of income, which is generally based on a description provided by the business.

        During the transition from ANZSIC 1993 to ANZSIC 2006, it was necessary to review the ANZSIC 2006 classification structure to determine which ANZSIC 2006 classes should be in-scope and which should be out-of-scope of the counts.

        For comparative purposes, the scoping changes resulting from the transition from ANZSIC 1993 to ANZSIC 2006 are summarised in the following table:

        The ANZSIC 2006 classes which are in-scope of the collection are considered to contain a significant concentration of actively trading businesses. The selected ANZSIC 2006 classes represent industries which contain a number of privately owned businesses, that since the development of ANZSIC 1993, are considered to be to actively trading in the market sector. As such, these ANZSIC 2006 classes have been brought within scope of the counts so as to provide a more comprehensive industry-based view of those businesses that were operating in the Australian economy.

        In comparison, the ANZSIC 2006 out-of-scope classes are considered to contain a significant concentration of entities that do not satisfy the definition of an "actively trading business". A number of these entities are operated by State and local governments, not-for-profit organisations, peak bodies and various associations and interest groups. Such entities are not considered to be actively trading in the market sector and, as such, continue to be excluded from the scope of Counts of Australian Businesses, including Entries and Exits.

        For further information on the transition from ANZSIC 1993 to ANZSIC 2006, users may wish to consult the Australian and New Zealand Standard Industrial Classification 2006 (cat. no. 1292.0) on the ABS website <www.abs.gov.au>. The ANZSIC 2006 classification contains a range of correspondence tables which illustrate how the previously excluded ANZSIC 1993 categories have been treated in ANZSIC 2006.

MAIN STATE
        Businesses can operate in more than one State or Territory. For businesses in the non profiled population, Main State is derived from the main business address. For businesses in the profiled population, Main State is the State or Territory with the highest employment. Therefore, for some businesses in the profiled population, Main State is not necessarily the State or Territory of the main business address.

        The Australian taxation system provides flexibility during the new business registration process as it allows businesses operating in single or multiple States or Territories to register on the ABR and report taxation obligations in a variety of ways. For instance, it is possible for a business entity to register for a single ABN regardless of the number of commercial activities it undertakes (sometimes visible in the number of physical "shopfronts" it may operate from). Alternatively, multiple commercial activities of a single business enterprise may be registered for separate ABNs, depending on the legal structure adopted by the enterprise. Hence where commercial activities are carried out by a number of different, but related entities, each entity may register for a separate ABN. As this publication defines a business on the basis of an ABN (or TAU in the profiled population), the counts may be regarded as providing partial coverage of businesses in a given State. For further information, please refer to the data quality declaration associated with Counts of Australian Businesses, including Entries and Exits (cat. no. 8165.0)

STATISTICAL LOCAL AREA
        The Statistical Local Area (SLA) is a general purpose spatial unit. It is the base spatial unit used to collect and disseminate statistics other than those collected from the Population Censuses. In aggregate, SLAs cover the whole of Australia without gaps or overlaps.

        SLAs are based on the boundaries of incorporated bodies of local government where these exist. These bodies are the Local Government Councils and the geographical areas which they administer are known as Local Government Areas (LGAs). An LGA is an SLA if it fits entirely within an Statistical Subdivision (SSD) and is broadly similar in size, economic significance and user needs for statistics to other LGAs in Australia.

        The issues of multi-location businesses are more pronounced for count data at the SLA level, as multi-location businesses (i.e. in respect of businesses registered under a single ABN/TAU) will only be attributed to a single SLA. As such, care should be taken not to assume that business counts at the SLA level reflect all business operations within that SLA. For further information, please refer to the data quality declaration associated with Counts of Australian Businesses, including Entries and Exits (cat. no. 8165.0).

        Sub-State level data cubes will again be released using SLA. The SLA data cubes replace the postcode-based data made available in February 2007. One of the main advantages of the SLA data over the previously published postcode data is that the SLA categories used in the aforementioned data cubes can be easily used to aggregate data to larger geographical areas, including Statistical Subdivisions, Statistical Divisions, and States/Territories, as part of the ASGC. For more information, users should refer to the Australian Standard Geographical Classification (ASGC) (cat. no. 1216.0).

        Users should note that from July 2011, the ABS will progressively replace the current Australian Standard Geographical Classification (ASGC) with the new Australian Statistical Geography Standard (ASGS) as its geographical framework. As such, the next release of Counts of Australian Businesses, including Entries and Exits is expected to be based on the new ASGS.

BUSINESS SIZE
        The sizing classifications presented in this release are based on employment and turnover reported by businesses, as defined below.

        In addition, previous publications involved employment and turnover classifications being held constant for each business at their latest available value. This release differs in that it classifies in-scope businesses according to their employment and turnover at particular points in time. For further information, please refer to the publication's Technical Note.

EMPLOYMENT SIZE
        Employing units are defined as:

        • in the non profiled population, businesses with a non-cancelled ITW role and which have remitted to the ATO at least once in the preceding five quarters. This may include a small number of businesses which have ITW roles for purposes other than withholding amounts from wages and salaries, and as such have zero employment; and
        • in the profiled population, businesses with greater than zero employees.

        The methods used to quantify employment in this release are based on "headcounts" of employees. However, different methodologies are applied depending on where (i.e. in which population) businesses reside in the ABS Business Register.

        In the non profiled population, ABS indirectly collects employment data through Payment Summary information, supplied by the ATO. This data provides an initial indication of employment for statistical purposes (i.e. a headcount of employees). Businesses report "number of payees", which is defined as the estimated number of individuals to whom payments are made. This will reflect the total number of persons employed by the business "throughout the year" rather than an estimate of current employees at a point in time. Payments to people under a voluntary agreement or labour hire arrangement are excluded.

        In the profiled population, businesses report "employment" as defined by the number of persons who are employed by a public or private employer and receive remuneration in wages or salaries (including working proprietors and working partners), or are paid a retainer fee by their employer. Employment excludes non-salaried directors; volunteers; persons paid by commission only; and self employed persons such as consultants and contractors. These data are collected through direct contact with businesses in the profiled population and reflect a "point in time" headcount of current employees.

        The employment data extracted from the ABSBR are generally suitable for the purposes of attributing an employment size classification to each in-scope business.  However, during processing, a subset of problem units were identified and a more robust methodology was developed to ensure all businesses were classified to an employment size range which reflected real world activity. 

        This involved examining the reported employment values of business which were known to be affected by recent changes to the ABSBR and imputing values as appropriate based on auxiliary data.  Specifically, historical employment data and BAS annual turnover data were used to develop a better quality impute.  This methodology is considered suitable for the purposes of classifying businesses into relatively broad employment size ranges.

ANNUAL TURNOVER SIZE
        Annual turnover values are based on data reported to the ATO through BAS and includes imputation for missing periods for all businesses in the non profiled population. For businesses in the profiled population, turnover reported on BAS for ABNs is aggregated to Enterprise (EN) level and is apportioned to the relevant TAUs.

        Where businesses report zero values on their BAS or have failed to report at all, these data are compared with auxiliary BAS data, which are then used for the purposes of assigning annual turnover values for each in-scope business. In cases where auxiliary BAS data are not available, an impute based on auxiliary ABSBR data (including wages and salaries and employment data) is used.

        The imputation technique described therefore classifies all in-scope businesses to a single annual turnover size range in Counts of Australian Businesses, including Entries and Exits.

CONFIDENTIALITY
        The data presented in the various cross-classified data cubes will be confidentialised to ensure no individual business can be identified. The confidentialising process applied is expected to maximise the availability of data without introducing any bias to the estimates.

        The confidentiality process to be used is the same as that applied in the previous release. This process involves the random rounding of data at the most detailed levels of the various classifications used.

        The confidentiality process will round data in such a way that the data presented at these detailed levels will not always be additive. That is, opening stock from the beginning of the financial year, plus entries, minus exits, may not be equal the closing stock for the end of the financial year. This is due to the fact that each of those components is individually rounded.

COMPARISON WITH OTHER BUSINESS COUNTS DATA
        Estimates of the number of businesses operating in the Australian economy may be derived from a number of sources within the ABS or from non-ABS sources. They may relate to a point in time, or may be average annual data. These estimates will not always show the same results. Variations occur because of the differing data sources, differing definitions of a business, differing scope and coverage as well as variations due to sampling and non-sampling errors.

        The definition of employing/non-employing in the ABS can also vary according to collection methodology, data sources, and user requirements.

        Users comparing data from this publication with other ABS data should do so with care, as some other ABS publications may exclude non-employing businesses or particular industries or sectors.

        For further details see the Explanatory Notes section of the relevant publications.

PREVIOUS RELEASES
        Information regarding previous releases of Counts of Australian Businesses, including Entries and Exits may be accessed on the ABS website <www.abs.gov.au>.
NEXT RELEASE
        The next release of Counts of Australian Businesses, including Entries and Exits is currently scheduled for release in December 2011.

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