Rising costs, compliance burdens and mental health impacts: The 2025 Small Business Perspectives Report surveyed 800 owners about what’s really happening.
What happens: More than 800 Australian small business owners reported falling profits, rising costs and significant personal financial strain in the 2025 Small Business Perspectives Report from COSBOA and CommBank.
Why this matters: The findings show the extent to which small business owners are absorbing economic pressure personally rather than passing on the costs.
Australian small business owners are working longer hours, managing rising costs and bearing personal financial risk at levels that suggest the sector’s resilience is being more severely tested than in recent years.
The Small Business Perspectives Report 2025, released by the Council of Small Business Organizations Australia (COSBOA) and the Commonwealth Bank, surveyed more than 800 small business owners across the country about their experiences over the past 12 months.
Profits fall sharply
The key finding: 64% of small businesses reported lower profits than the previous year, a sharp increase from 40% in 2024. This decline translates into direct personal impact, with 60% of owners unable to pay themselves at least occasionally. A quarter regularly spent personal savings to keep their businesses running.
“Small business owners are working harder than ever to keep pace with rising costs, workforce shortages, regulatory complexity and the relentless pace of digital disruption. Many are dipping into their savings or deferring their own wages to stay afloat, but they continue to adapt, innovate and serve their communities,” said Matthew Addison, COSBOA President.
High operational costs emerged as the biggest barrier to growth, with 72% of respondents citing rising operating costs as their main obstacle to expansion. Nearly three-quarters expect costs to rise again in the next twelve months.
The burden of compliance
Compliance with regulations takes a lot of time and resources. Many owners spend more than six hours a week on regulatory tasks, with compliance among the top five business expenses. These administrative burdens are accompanied by a labor shortage and what entrepreneurs describe as high wage expectations in relation to their ability to pay.
“Behind every statistic is a business owner weighing the risks, taking personal financial responsibility and navigating a system that often feels like it’s turned against him,” Addison said.
The personal cost of these pressures is reflected in mental health statistics: 76% of respondents reported experiencing stress or anxiety, while 57% experienced burnout. These figures suggest that the economic pressures small businesses face translate into significant impacts on the well-being of the individuals who run them.
The acceptance of AI is increasing
Despite these challenges, the report found evidence of adaptation. Of small businesses that use artificial intelligence, 46% say they have improved their operations in some way, pointing to efficiency gains from technology adoption.
Business satisfaction remains relatively high, with 63% of small business owners satisfied with their decision to start their business. Purpose, independence and community connection were cited as strong motivators to continue.
Rebecca Warren, Commonwealth Bank’s Executive General Manager for Small Business, noted that despite the challenges, there was cautious optimism emerging.
“While the work environment is tougher and more complex than ever, small business owners remain committed to their workforce, customers and communities. Their determination continues to inspire us,” said Warren.
“Encouragingly, in my conversations with small businesses, many tell us they are more confident about the year ahead. Lower interest rates are beginning to support stronger consumer spending, and for those facing challenges, we are ensuring they have access to the support and tools they need to keep their businesses running.”
Nearly half of respondents (45%) expect customer demand to improve over the next twelve months, reflecting cautious optimism about future growth despite current pressures.
The report highlights policy areas where COSBOA believes intervention could change outcomes for small businesses, including fairer taxation, targeted skills support, digital investments and regulatory simplification.
“With the right policy settings – fairer taxes, targeted skills support, digital investment and a meaningful reduction in red tape – we can shift the prospects for small businesses from survival to growth,” Addison said.
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