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SUMMARY OF FINDINGS

There were 2,132,412 actively trading businesses in Australia as at June 2011.

While the number of businesses declined between 2007-08 and 2008-09, there was a significant increase in the number of businesses over 2009-10 and 2010-11. Specifically, growth rates for the past four financial years were -0.1% during 2007-08, -1.0% during 2008-09, 3.6% in 2009-10 and 0.4% in 2010-11.

In comparison, Gross Domestic Product (GDP, in chain volume terms) over the corresponding periods grew by 3.8%, 1.4%, 2.3% and 2.1% respectively, while Australia's population grew by 1.7%, 2.1%, 1.7% and 1.4% over the same periods.

The increase in the number of businesses during the financial year to June 2010 can be attributed to a significant increase in entry rates, coupled with a slight decrease in exit rates. Although the entry rate dropped somewhat in the financial year to June 2011, it remained higher than the exit rate, resulting in a slight increase in the overall counts during 2010-11. Specifically, during 2009-10, the entry rate for new businesses was 16.7% and the exit rate was 13.1%. During 2010-11, the entry rate was 13.9%, and the exit rate was 13.5%.

In terms of business survival rates, of the 2,073,793 businesses operating in June 2007, 84.6% were still operating in June 2008, 73.5% were still operating in June 2009, 66.3% were still operating in June 2010 and 60.4% were still operating in June 2011.

Of the 316,850 new business entries during 2007-08, 71.5% were still operating in June 2009, 56.8% were still operating in June 2010 and 48.6% were still operating in June 2011. As such, the survival rates for new businesses are significantly lower than for those businesses that were already established. This indicates that business survival is related to the age of the business, i.e. the longer a business survives, the greater its chances of continued survival.

Survival rates are also heavily influenced by the size of the business. For example, non-employing businesses have a significantly lower survival rate compared to employing businesses (43.3% of non-employing entries in 2007-08 were still operating in 2011, compared to 60.0% of employing entries). However, non-employing businesses account for the greatest proportion of both total businesses and business entries (61.2% of all businesses operating in June 2011 and 67.6% of business entries in 2010-11 were non-employers).

At June 2011, the distribution of the Australian business population by industry was similar to the distribution recorded in June 2009. Construction had the greatest number of businesses with 351,890 (16.5% of the total). This was followed by Professional, scientific and technical services and Rental, hiring and real estate services with 250,613 and 226,157 respectively (11.8% and 10.6%), and Agriculture, forestry and fishing with 198,163 (9.3%).

During 2010-11, Administrative and support services and Accommodation and food services had the highest entry rates (both at 18.0%) followed by Public administration and safety (17.1%), and Information media and telecommunications (15.9%). Conversely, exit rates were highest for Public administration and safety (17.9%), followed by Administrative and support services (17.3%) and Accommodation and food services (16.0%). With the Public administration and safety, Administrative and support services and Accommodation and food services industries experiencing relatively high entry and exit rates, these industries have been subject to a significant amount of churn over 2010-11.

Over the same period, Mining had the greatest percentage increase, with business counts increasing 4.2%. This was followed by Health care and social assistance (3.5% increase). Conversely, Agriculture, forestry and fishing had the greatest percentage decrease with business counts dropping 2.7%. Both Agriculture, forestry and fishing and the Manufacturing industry have recorded a decrease every year since this series began in 2007.

The survival rates at June 2011 for businesses operating in June 2007 were highest for Health care and social assistance (71.6%) and Agriculture, forestry and fishing (69.8%), followed by Rental, hiring and real estate services (67.8%). Over the period June 2007-2011, the survival rates attributed to these industries were consistently higher than those recorded in other industries.

Survival rates over the same period were lowest for businesses operating in Public administration and safety (49.2%), followed by Accommodation and food services (51.7%) and Administrative and support services (52.8%).

The survival rates for new business entries during 2007-08 were similar in terms of their industry breakdown to those for the stock of businesses at June 2007. The business entry survival rates were led by Health care and social assistance (61.7%) and Rental, hiring and real estate services (56.3%), both with survival rates well above the national average of 48.6%.

Users should be aware that the analysis provided above is based on those businesses that were coded to an ANZSIC 2006 industry category. It does not take into account those businesses that had not passed through the ATO's new business registration process during the publication's reference period and were not allocated to an ANZSIC 2006 category. As such, all counts by industry (including entries and exits) included in this publication are likely to contain a small degree of undercount (as seen in the "currently unknown" categories in publication tables). Users should therefore exercise care when using this publication's industry based tables.

At June 2011, the proportion of businesses by State (as defined by the main State of operation) was broadly aligned with the proportion of Australia's population by State. New South Wales, Victoria and Western Australia were the only States which contained a higher proportion of businesses than people.

For the smaller States (Tasmania, Northern Territory and the Australian Capital Territory), the proportion of the population continued to outweigh the proportion of businesses (for example, Tasmania had 2.3% of the population and 1.8% of businesses). The Northern Territory had the lowest populations in terms of both people and businesses (1.0% and 0.7% respectively).

In the year to June 2011, most States recorded an increase in the number of businesses, the Northern Territory leading the way with a 1.6% increase. Only Queensland (-0.6%), Tasmania (-0.5%) and South Australia (-0.2%) recorded small decreases. However, the largest increases were seen during 2009-10, with all States recording an increase, the largest being in Victoria (4.3%), the Australian Capital Territory (3.9%) and New South Wales (3.7%). This was in stark contrast to 2008-09, where all States recorded a decrease.

During 2010-11, the Australian Capital Territory (16.0%), the Northern Territory (15.8%) and Victoria (14.4%) experienced the highest entry rates, with the lowest entry rate being Tasmania (11.2%). Further, exit rates were highest for the Australian Capital Territory (14.6%), Queensland (14.3%) and the Northern Territory (14.2%), while Tasmania (11.6%) and South Australia (12.2%) recorded the lowest exit rates.

Of those businesses operating in June 2007, the survival rates at June 2011 were highest in Tasmania (63.9%) and South Australia (63.1%) and lowest in the Australian Capital Territory (57.3%) and the Northern Territory (57.4%). The survival rates for those businesses that entered during 2007-08 were highest for Tasmania (54.2%) and lowest for the Northern Territory (45.1%).

At June 2011, 1,281,136 (60.1%) of businesses were classified to the Household sector (which includes most unincorporated businesses), while 644,734 (30.2%) were classified to the Non-financial corporations sector, and 159,468 (7.5%) to the Financial corporations sector. The remaining businesses were yet to be coded to an Institutional Sector.

During 2010-11, both the Financial corporations sector and Non-financial corporation sector recorded positive growth (2.5% and 1.9% respectively), where as the Household sector contracted (-0.6%). Entry rates were similar across the sectors, recorded at 13.7% for Financial corporations,13.3% for Households and 12.9% for Non-financial corporations. In comparison, exit rates were 13.9% for the Household sector, 11.2% for Financial corporations and 11.0% for Non-financial corporations. Each entry rate decreased from the previous year, while exit rates remained comparatively stable.

The survival to June 2011 of businesses that were operating in June 2007 was higher for businesses in the Non-financial corporations sector (66.3%) than for those in the Financial corporations (62.2%) and Households sectors (58.2%). However, survival rates for Financial corporations which entered in 2007-08 were higher (55.7%) than for the other sectors (Non-financial corporations and Households at 54.6% and 47.1% respectively).

Users should be aware that the analysis provided above is based on those businesses that were coded to a SISCA 2008 institutional sector category. It does not take into account those businesses that had not passed through the ATO's new business registration process during the publication's reference period and were not allocated to a SISCA 2008 category. As such, all counts by sector (including entries and exits) included in this publication are likely to contain a small degree of undercount (as seen in the "currently unknown" categories in publication tables). Users should therefore exercise care when using this publication's sector based tables.

At June 2011, there were 702,342 (32.9%) Companies in Australia, followed by 622,832 (29.2%) Sole proprietors, 465,802 (21.8%) Trusts and 340,839 (16.0%) Partnerships. There were a relatively small number of businesses (<1%) operating in the Public sector. However, the scope and definitions used to define a business in this publication should be taken into account when using the public sector data. For further information, please refer to the publication's explanatory notes.

Over the entire 2007-2011 times series, each year has marked a decline in the number of Partnerships (-4.0% in 2007-08, -4.9% in 2008-09, -1.6% in 2009-10 and -3.8% in 2010-11 ) and three out of the four years has marked a decline in the number of Sole Proprietors, both forms of unincorporated businesses. In contrast, there was an increase in the number of Trusts each year over the same period (6.8% in 2007-08, 3.3% in 2008-09, 7.7% in 2009-10 and 4.4% in 2010-11). Further, there was a steady increase in the number of companies. As a result of these movements, Companies are currently the most common form of legal organisation, followed by Sole proprietors and Trusts. Partnerships are the least common form of private sector legal organisation for Australian businesses.

Out of all private sector businesses in the period June 2010-11, entry rates were highest for Sole proprietors (17.0%) and Trusts (14.1%), followed by Companies (13.7%) and Partnerships (8.3%). Conversely, exit rates were highest for Sole proprietors (18.9%) and were noticeably lower across the other private sector categories.

For both the stock of businesses and for business entries, survival rates have been consistently higher for Trusts and Companies, while they have been lower for Sole Proprietors and Partnerships.

At June 2011, there were 826,389 (38.8%) employing businesses and 1,306,023 (61.2%) non-employing businesses.

Of the employing businesses, 739,312 (89.5%) employed less than 20 employees. This comprised 508,674 businesses with 1-4 employees and 230,638 businesses with 5-19 employees. There were also 81,006 businesses with 20-199 employees and 6,071 (<1%) businesses with 200 or more employees.

In 2010-11, most business entries (93.5%) continued to occur in the micro business population, which comprises non-employing businesses and businesses employing between 1-4 employees. Exit rates over the same period were significantly higher for non-employing businesses (16.9%), compared to all other size categories (exit rates for 1-4. 5-19, 20-199 and 200+ were 9.5%, 6.4%, 4.6% and 4.8% respectively).

Of those businesses that survived from June 2010 to June 2011, 89.5% were classified to the same employment size range at the end of the year as they were at the start of the year, 5.6% were classified to a smaller size range, and the remaining 4.9% were classified to a larger size range (grew). Of those businesses that grew, 90,948 moved up at least one size range over the course of the year, of which 5,767 moved up two or more size ranges. In comparison, 102,107 experienced negative growth (i.e. moved down at least one size range) over the course of the year, of which 12,914 moved down two or more size ranges.

In addition, of those businesses that survived from June 2010 to June 2011, both inflow and outflow were highest for businesses employing between 1-4 employees (65,523 and 91,232 respectively). Not only does this signify a high degree of churn in this category, but the relatively high outflow resulted in a net movement (outflow) of 25,709 businesses. All other employment size categories recorded net inflows and were led by non-employing businesses, with a net inflow of 23,788. This indicates that a large amount of businesses who employed between 1-4 employees at June 2010 dropped to be non-employing businesses at June 2011.

The survival rates for businesses operating since June 2007 showed some variance between the employing (69.9%) and the non-employing (54.0%) populations. In addition, survival rates were lower for businesses employing between 1-4 employees (67.0%) compared to the larger employment size ranges of 5-19 (74.0% survival rate), 20-199 (75.8% survival rate) and 200+ (74.3% survival rate).

At June 2011, there were 736,370 (34.5%) businesses with turnover from $50k to less than $200k. This was followed by 653,164 (30.6%) businesses with turnover from $200k to less than $2m, 617,755 (29.0%) businesses with turnover between zero and $50k, and 125,123 (5.9%) businesses with turnover above $2m per annum.

In the period 2010-11, entry rates were highest for businesses with turnover from $50k to less than $200k (16.8%), followed by businesses with turnover from zero to less than $50k (15.5%). Exit rates over the same period were highest for businesses with turnover between zero to less than $50k (20.8%), followed by businesses with turnover from $50k to less than $200k (13.8%), signifying the high amount of churn in these categories. Both entry and exit rates were lowest for businesses with turnover above $2m per annum (3.7% and 4.0% respectively).

Of those businesses that survived from June 2010 to June 2011, 78.7% were classified to the same turnover size range at the end of the year as they were at the start of the year, 10.9% were classified to a smaller size range, and the remaining 10.3% were classified to a higher size range (grew). Of those businesses that grew, 190,253 moved up at least one size range over the course of the year, of which 14,345 moved up two or more size ranges. In comparison, 200,498 experienced negative growth (i.e. moved down at least one size range) over the course of the year, of which 24,793 moved down two or more size ranges.

In addition, of those businesses that survived from June 2010 to June 2011, both inflow and outflow were highest for businesses with turnover between $50k to less than $200k (147,796 and 174,855 respectively). The relatively high outflow for businesses in this category resulted in a net movement (outflow) of 27,059 businesses. The net movement for businesses with turnover between $200k to less than $2m also resulted in an outflow of 3734. In contrast, all other turnover size categories recorded net inflows and were led by businesses with turnover between zero to less than $50k, with 26,422 businesses moving into this category.

The survival rates for businesses operating since June 2007 were generally higher for businesses with higher annual turnover. The survival rates of business entries were similarly distributed.