Ageing business owners and rising insolvencies ‘creating perfect storm’
RSM Australia has urged the government to address issues threatening the sustainability of Australia’s small business sector in the upcoming budget.
The convergence of Australia’s ageing small business ownership profile and increasing insolvencies should sound alarm bells for governments and industries, according to national professional services firm RSM Australia.
The accounting firm noted that almost 30 per cent of Australia’s 2.6 million small businesses are 50 years or older, with just under half of these business owners 340,000 approaching or already past retirement age, based on ASBFEO data.
At the same time, RSM said both the ATO and creditors have stepped up their debt recovery actions against falling businesses, leading to increased insolvencies.
The ATO recently reported that small businesses were responsible for around 90 per cent of the $52 billion in debts owed to the ATO.
The increased collection activity by the ATO and other creditors has seen insolvencies continue to spike, with insolvencies already at 8,461 at 21 April and already above the total 7,942 insolvencies for the entire 2022-23 financial year.
RSM Australia Partner of Business Advisory in Brisbane Andy Graham said the combination of these two trends is creating a perfect storm for Australia’s small business landscape.
Graham said that while the Federal Government had provided well-received short-term relief to small businesses through measures such as the instant asset write-off and energy rebates, the upcoming Federal Budget needs to address the long-term sustainability of Australia’s small business sector, and in particular focus on energy supply and supporting innovative entrepreneurs to drive productivity outcomes.
“For small business, this will also require addressing well overdue tax reforms in areas such as employment taxes, intergenerational business transfers and GST,” Graham said.
“The latest intergenerational report recognises the economic impact of Australia’s ageing population, but there’s no mention of the ageing profile of small business owners and what this means for the services that support and sustain communities across the nation,” he said.
Australia’s small business owners have been getting older over the past 40 years reflecting a generational shift in attitudes towards business ownership, the firm said.
Graham said while there were some positive signs of a new wave of emerging millennial business entrepreneurs, the big question remained about who would take over the hundreds of thousands of existing businesses serving local communities across Australia.
“Concerningly, in 2022-23 the number of new small business entrants (405,000) was only just ahead of the number exiting the business scene (384,000),” he said.
“As business advisors, we’ve seen family business owners, in particular, holding on to the reins for longer because they don’t have a succession option in a younger family member.”
Graham said investment market volatility had also played a key role with owners of successful businesses calculating they could get a better return on their capital by staying in their business for longer rather than taking the proceeds from sale and investing in the market.
“However, this delayed transition brings risks. What we don’t want to see is small business owners forced into fire sales because of ill-health or to sell the family home because of mounting debts,” he said.
