The latest Small Business Perspectives Report 2025 from the Council of Small Business Organisations Australia (COSBOA) has dropped, and it paints a picture of a small business sector doing it tough. Business owners are exhausted, drowning in red tape and feeling strapped for cash, yet surprisingly many remain hopeful for the future.
The research, supported by CommBank, surveyed more than 800 small business owners across the country. It found that while determination and optimism remain strong, rising costs, regulatory overload, and mental strain are pushing many small business owners to their limits.
“What we’re seeing is not a lack of resilience, but a system that needs to do more to support small businesses,” said COSBOA chair Matthew Addison.
Key points
- 64 per cent of small businesses saw profits fall while costs kept climbing.
- Six in ten business owners can’t pay themselves.
- 76 per cent report stress or anxiety, and more than half are feeling the mental toll.
- Red tape and rising costs top the pain list.
Business profits plunge as costs soar
Across nearly every sector, profitability has taken a nosedive. Sixty-four per cent of small businesses reported lower profits than last year. That’s up sharply from 40 per cent in 2024, while 93 per cent said business costs have increased.
Owners pointed to tax, wages, insurance, compliance and energy as their top financial burdens. Half ranked taxes among their top three pressures, with many arguing the system punishes small operators for hiring and expanding.
“The amount of red tape and high tax burden often means more time and money spent on paperwork instead of investing in growth,” said one construction business owner quoted in the report.
The personal price of doing business
Behind the spreadsheets are small business owners quietly going without just to keep the doors open.
The owner of a professional services firm commented: “I’m paying my employees and suppliers, but there’s nothing left for me and my family.”
They’re not alone. Six in ten said they couldn’t pay themselves at least occasionally in the past year, while one in four regularly dipped into personal savings to keep their business afloat.
The financial sacrifice is taking a heavy toll on wellbeing. Seventy-six per cent of owners reported stress or anxiety, 65 per cent experienced sleep disruption, and 57 per cent said they’d hit burnout. Yet fewer than one in four have a strong support network to turn to for support.
“These are people who’ve built livelihoods, created jobs and supported their communities, but they’re often the ones struggling most,” Addison said. “Small business owners are doing everything right, but the system is working against them.”
“We’re too busy doing the doing”
Even for those still standing, there’s little time to breathe. Many business owners said they’re spending more than 12 hours a week on compliance and financial admin. That’s everything from BAS statements and payroll to ever-changing regulatory updates.
As one manufacturer told COSBOA: “The growing layers of red tape often divert valuable time and resources away from innovation, growth, and serving our customers.”
Only 38 per cent of owners said they fully understand all their regulatory obligations, leaving many anxious about making mistakes. Industrial relations rules, in particular, were a major sticking point, with 40 per cent saying payroll tax and workplace laws had prevented them from hiring staff in the past year.
Hiring headaches and wage pressures
High wage expectations and a lack of skilled candidates continue to stall business growth. COSBOA found that 71 per cent of owners say wages are now one of their biggest barriers to hiring, while 70 per cent can’t find suitably qualified staff.
For Sydney business owner Simon Potts, who runs packaging supplier Boxes for Business, the balance feels all wrong.
“My employees earn more than I do,” he said. “The average wage of an employee is actually higher than it is for a small business owner. And yet the government keeps promoting things like, ‘we’re looking after low-paid workers’. The irony is, many of the low-paid workers are actually the business owners.”
Across retail, hospitality, construction and healthcare, small business owners say they’re desperate for more flexibility and simpler workplace rules. Many told COSBOA they’ve avoided hiring altogether for fear of breaching awards or making a costly HR mistake.
“The system isn’t built for us”
In regional Australia, the pressures are even more pronounced.
South Coast entrepreneur Kate Dezarnaulds, who runs a network of coworking spaces under the WorkLife banner, said rising rents, unaffordable insurance, and inflexible employment laws have made her once-thriving business increasingly hard to sustain.
“I love what I do, but the stress, the trade-offs, and the sense that the system isn’t built for us, it wears you down,” she said.
Kate says small operators like hers need fairer access to finance, regulation that reflects the realities of regional business, and more flexible employment laws that let them scale up or down without penalty.
The double-edged sword of digital tools
Technology is both a blessing and a burden for small businesses. On one hand, AI and automation are improving productivity: 46 per cent of businesses using AI said it had helped their operations. On the other, cyber security and tech costs are a growing headache.
Michele Grisdale, who runs Rainforest Bookkeeping on the NSW Central Coast, says compliance software alone eats up a huge chunk of her profit. “My subscription costs are massive,” she said. “They’re just way too expensive for sole and small practitioners to be able to do what we want to do.”
Cyber security is another worry. Nearly one in five small businesses admits they have no digital protection in place, despite handling sensitive customer data.
“Protection for one computer might be $100,” Michele said. “But if you’ve got multiple laptops and phones, you’re quickly over $500 a month. It’s just not achievable for many small businesses.”
Still resilient but running out of steam
Despite the tough climate, most small business owners still say they’re glad they took the leap. Sixty-three per cent remain satisfied with their decision to start a business, driven by independence, flexibility and a sense of purpose.
Many are cautiously optimistic about the next year. Nearly half (45 per cent) expect customer demand to pick up as inflation eases and interest rates settle. But only one in five believes profits will improve, with 72 per cent expecting costs to keep rising.
Commonwealth Bank’s Executive General Manager for Small Business, Rebecca Warren, said that while the operating environment is more complex than ever, resilience remains the defining trait of Australia’s small business community.
“Small business owners are passionate, resilient people who take risks, create jobs and innovate,” she said. “Encouragingly, many are telling us they feel more confident about the year ahead. Lower interest rates are beginning to support stronger consumer spending, and for those facing challenges, we’re ensuring they have access to the support and tools they need to keep their businesses running.”
What small businesses want
When asked what would actually help them, business owners were consistent in their wishes:
- Lower taxes and charges — especially payroll tax, which many see as a disincentive to hire.
- Simpler, fairer compliance systems — plain-English rules and less duplication between states.
- Flexible, practical industrial relations laws that reflect the realities of small teams.
- Affordable finance and insurance options that don’t require risking the family home.
- Digital capability programs to help small businesses adopt AI and cybersecurity without breaking the bank.
“Lower red tape and taxes for small business to free my time and money so I can employ people more confidently and in turn grow my business,” one professional services owner said.
A call for reform
COSBOA chair. Addison described the findings as a wake-up call for policymakers.
“Behind every statistic is a business owner balancing risk, carrying personal financial responsibility, and navigating a system that often feels stacked against them,” he said.
“With the right policy settings — fairer tax, targeted skills support, digital investment and meaningful red tape reduction — we can shift the outlook for small business from survival to growth.”
Addison said COSBOA will continue pushing for those changes, including lower tax rates, simpler compliance, and support for digital and cybersecurity initiatives, such as the Cyber Wardens program.
“Small businesses are not just economic contributors,” Addison said. “They are employers, innovators and community leaders. With the right support, they’ll continue to power Australia’s prosperity and shape our nation’s future.”
Addison is quick to point out that businesses don’t need handouts. Instead, they need governments to get out of the way, cut the red tape, and let them do what they do best: build, innovate and keep Australia moving.
“It’s a sector that’s exhausted but not defeated,” Addison concluded.
If you need help managing your business cashflow, contact us today.
Source: Flying Solo October 2025
This article by Cec Busby is reproduced with the permission of Flying Solo – Australia’s micro business community. Find out more and join over 100K others https://www.flyingsolo.com.au/join.
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