APPENDIX 2 ABS BUSINESS OPERATORS COUNTS


INTRODUCTION

The following Appendix provides a brief history of ABS business operator counts and discusses planned future developments.

The ABS has been producing business operator counts for many years. These counts have been presented in the form of business demography products, most recently, through this publication, Counts of Australian Business Operators (CABO).

In addition, ABS has been producing data pertaining to owner managers of incorporated and unincorporated enterprises (each being a subset of the Australian business operator population) across a range of other statistical products.

Over time, ABS has been working to improve the quality of business operator counts and has been developing new sources of business operator data.


COUNTS FROM THIS RELEASE

The business operator data presented in this release have been derived from two data sources: the 2012 Forms of Employment Survey and the 2011 Census of Population and Housing (Census).

These data are relevant for users interested in understanding the characteristics of those persons engaged in one or more businesses currently operating within the Australian economy.

The 2012 Forms of Employment Survey was used to derive counts (as well as proportions) of business operators in Australia, while the 2011 Census has been used as a data source to produce a range of proportions relating to Australian business operators (including small business operators).

The decision to use Forms of Employment Survey data to produce count data was taken following detailed analysis which confirmed that the overall counts derived from the Forms of Employment Survey provided for a more reliable and accurate series of estimates compared with data derived from other sources (including from other Monthly Labour Force Supplementary Surveys and the 2011 Census). Specifically, data confrontation exercises confirmed Forms of Employment Survey data compared well with data derived from a range of administrative and survey sources.

This approach is expected to provide a more stable platform upon which users will be able to access data pertaining to the changing demographics of Australia's business operators over time.


DISCONTINUED ABS BUSINESS COUNTS

Counts from the ABS Business Register (Prior to 2002)

The ABS has maintained an integrated business register (ABSBR) since the development phase of the first Integrated Economic Censuses conducted in respect of 1968-69.

From the amendment of the Income Tax Assessment Act in 1986 until 2002, this was primarily sourced from Group Employer (GE) registrations with the Australian Taxation Office (ATO). When a business commenced employing staff, a GE registration was required to enable the business to deduct income tax from its employees.

No comprehensive register of 'Non-employing' businesses was maintained by any government organisation and the ABS did not seek to create such a register. As such, any business counts produced from the ABSBR prior to 2002 included 'Employing' businesses only.

A further short coming in these counts was that proper recording of businesses which had commenced, ceased or continued operation did not occur consistently over time. For example, a units survey in 1991 identified a significant number of businesses which had previously been included on the ABSBR but had ceased operation. These businesses were subsequently removed from the ABSBR. In 1996, a survey of businesses which had been removed as a result of feedback from survey processing identified a significant number of businesses which were in fact still operating.

In both these cases and other in similar instances over time, ABS economic statistics were backcast to adjust for these effects over time.


Counts from Small Business in Australia (1988-2001)

The ABS first released Small Business in Australia (cat. no. 1321.0) in 1988. This compendium release included a range of statistics about small businesses.

'Non-employing' businesses (such as self employed tradespeople) are a significant component of the small business sector. As such, it was important to include both counts and characteristics of these in Small Business in Australia (cat. no. 1321.0).

These counts were derived from the monthly Labour Force Survey (LFS) and were progressively updated until the final issue of Small Business in Australia (cat. no. 1321.0) in 2001. To produce a comprehensive count of small businesses, the LFS sourced counts of non-employers were added to counts of employing businesses sourced from the Survey of Employment and Earnings (which used the ABSBR as a frame). The counts of small businesses stood at approximately 1.2 million in 2001.

The counts of 'Non-employing' businesses were almost certainly significantly understated for two reasons:

• Those counts did not fully capture businesses operated by people whose predominant labour force status was other than a small business operator; and
• Those counts did not fully capture multiple businesses owned by one operator. It has not been possible to accurately quantify this underestimate.

Counts included in Characteristics of Small Business (1995-2006)

The ABS first released Characteristics of Small Business (cat. no. 8127.0) in 1995. This compendium release also included a range of information about small businesses, including counts of small businesses and small business operators.

The decision to discontinue Characteristics of Small Business Operators (COSBO) was driven by the development of superior data sources, and the findings of a methodological review of the 2005 and 2006 COSBO surveys. The review compared data from the 2005 and 2006 COSBO surveys with data from the 2006 Census of Population and Housing and a range of Labour Force Supplementary Surveys. It concluded that, while some data items collected continue to provide an ongoing and accurate picture of the changing nature of the Australian small business and small business operator populations, a more consistent picture was provided by the alternate data sources.

Users should note that since the discontinuation of COSBO, the ABS has developed a publication focussing exclusively on Australian business operators. Counts of Australian Business Operators (cat. no. 8175.0) first released in October 2008 and utilises data from the ABS Census of Population and Housing and the ABS Forms of Employment Survey (FOES) to present a range of demographic data. Further information can be obtained from the ABS website <www.abs.gov.au>.


Counts from Australian Bureau of Statistics Business Register, Counts of Businesses (2005)

From 2002, the ABS changed the basis of the ABSBR from GE registrations to ABN registrations sourced from the Australian Business Register (ABR). From the introduction of the new tax system in July 2000, businesses required to remit GST, deduct income tax from employees or to participate in several other aspects of the tax system were required to register for an ABN on the ABR.

The ABS released experimental estimates of business entries and exits and the first counts from the ABR based ABSBR in 2005.

The release of Australian Bureau of Statistics Business Register, Counts of Businesses (cat. no. 8161.0.55.001) in October 2005 showed 3.0 million businesses operating as at June 2004, 2.9 million of which were small businesses.

These counts significantly overstated the number of businesses actively producing or distributing goods or providing services in the Australian economy for two reasons:

• They included businesses which did not have a GST role and whose only tax role was to enable the payment of Income Tax Instalment Provisions. Subsequent investigations indicate that these entities tend to be investment vehicles rather than actively trading businesses; and
• They also included businesses with a GST role but which had not remitted GST obligations for at least five successive quarters. These businesses have been termed 'long term non remitters' (LTNRs). Subsequent investigations indicate that the majority of these businesses were no longer active.

Both categories of businesses, which in combination (noting some overlap) contributed over 1 million to these previously released counts, have been excluded from the counts in this release.


CURRENT ABS BUSINESS COUNTS

Counts of Australian Businesses, including Entries and Exits

Feedback from users since the 2005 release indicated that counts of actively trading businesses, rather than all entities carrying out economic activity, were more valuable for the various uses to which business counts were being put.

This resulted in the development of Counts of Australian Businesses, including Entries and Exits (cat. no. 8165.0), first released in February 2007.

The counts showed that there were approximately 1.9 million actively trading businesses at that time. The differences between the count of 1.9 million and the count of approximately 3.0 million from the 2005 release was due to the exclusion of:

• Entities which had an active ABN but which had not have a GST role. While economically active, these entities were mainly businesses with asset holdings and consequent income flows but had not traded in goods and services; and
• Businesses with a GST role which had not returned a Business Activity Statement (BAS) for more than five quarters or had returned a BAS reporting zero dollar amounts. These businesses were likely to be no longer trading.

In combination (noting some overlap) there were approximately 1 million businesses in the above categories.

Counts of Australian Businesses, including Entries and Exits (CABEE) was released again in December 2007 and showed that Australia's population of actively trading businesses had exceeded 2 million. A third release of CABEE in October 2010 showed that business counts had dropped slightly, but still remained above 2 million.

In January 2012, a fourth release of CABEE showed that business counts increased over the 2009-10 (3.6%) and 2010-11 (0.4%) years.

In May 2013, a fifth release of CABEE showed that business counts over the 2011-12 (0.4%) year.

The ABS plans to continue releasing CABEE. The publication is expected to provide users with a regular snapshot of Australia's population of actively trading businesses.


Counts Produced from ABS Business Surveys (1968 to current)

Since 1968, several ABS business surveys, using the ABSBR to provide a survey frame, produced counts of businesses as by product from survey processing.

These counts were consistent with business counts sourced directly from the ABSBR except they were adjusted to account for businesses identified in survey processing as no longer operating. However, the scope of these counts aligned with the scope of the respective surveys.

Therefore, counts of business entities derived from ABS surveys may not necessarily be comparable with the counts of actively trading businesses included in CABEE. Users should refer to the Explanatory Notes of the respective publications for further information.


PERSPECTIVES ON REGIONAL AUSTRALIA: BUSINESS OWNERS IN REGIONS, 2011 (CAT. NO. 1380.0.55.008)

This publication analyses two sources of regional data about business owners - the Census of Population and Housing and Estimates of Personal Income for Small Areas. There are, however, major differences between the two collections, including differences in definitions and timing, which are important to consider when interpreting the data.

This publication focusses on the group of self-employed people who own unincorporated businesses, the regions they live in, the industries they work in and the income they earn from their businesses. There are two sources of regional data about business owners - the Census of Population and Housing and Estimates of Personal Income for Small Areas. There are, however, major differences between the two collections, including differences in definitions and timing, which are important to consider when interpreting the data.

Owners of unincorporated businesses represent a small but distinct category of regional labour markets and understanding this group can provide useful information for regional planners and policy makers who seek to address regional employment and economic issues.

Across Australia, more than one in every seven (15%) income earners earned some income from an unincorporated business in 2009-10. In some regions, however, including rural regions in Queensland, Western Australia, South Australia and New South Wales, business owners made up over a quarter of income earners. On average, people tended to earn much less from an unincorporated business than from all sources of income. Census data indicates that less than half of the people who earned income from an unincorporated business did so as their main job. Of the people who ran an unincorporated business as their main job in 2011, approximately two-thirds of them (66%) were male and their median age was 47, about 7 years older than the average worker. Business owners who ran their business as a main job tended to work in construction, agriculture, forestry and fishing (especially business owners outside of the greater capital cities), and professional, scientific and technical services (especially those in the greater capital cities).


COUNTS INCLUDED IN OTHER RELEASES

ABS has been producing data pertaining to owner managers of incorporated and unincorporated enterprises (subsets of the business operator population) across a range of statistical products.

Most notably, numerous publications using Monthly Labour Force Survey data (including the Forms of Employment Survey) have included estimates relating to the owner manager populations, disaggregated by a wide variety of characteristics. Many of these characteristics have also been included in Counts of Australian Business Operators.


FUTURE DIRECTIONS

The ABS will assess the user demand of this publication prior to forming a decision on future releases.