APPENDIX 1 ABS BUSINESS COUNTS

INTRODUCTION

The ABS has been producing business counts for many years, either as direct counts of businesses, as a by-product from survey processing, or as a combination of the two.

Over time, the scope and coverage of businesses included in these counts has changed significantly.

Business counts included in this release are a relevant source for users interested in understanding the number of businesses actively producing or distributing goods or providing services in the Australian economy.


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 shortcoming 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 in other similar instances over time, ABS economic statistics were backcast to adjust for these effects over time.


Counts from Small Business in Australia (1988 to 2002)

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.

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 2002. 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.
• Those counts did not fully capture multiple businesses owned by one operator. It has not been possible to accurately quantify this underestimate.

Counts from Characteristics of Small Business (1996-2006)

The ABS first released Characteristics of Small Business, Australia (cat. no. 8127.0) in 1996. 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 new publication focussing exclusively on Australian business operators. Counts of Australian Business Operators (cat. no. 8175.0) was first released in October 2008 and again in October 2013 and utilises data from the ABS Census of Population and Housing and the ABS Forms of Employment Survey to present a range of demographic data. Further information can be obtained from the ABS website.


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 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 ABSBR using the ABR 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.
• 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 (2007 to current)

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 did 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.
• 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.

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 increased over the 2010-11 (0.4%) and 2011-12 (0.4%) years.

The sixth release of CABEE in March 2014 reported a 2.9% decrease in the number of actively trading businesses in Australia during 2012-13.

The seventh release of CABEE in March 2015 reported a 1.0% increase in the number of actively trading businesses in Australia during 2013-14.

The ABS plans to continue releasing CABEE, which 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 ABS surveys for further information.