What’s happening: The federal government will halve apprenticeship incentive payments for most priority occupations starting in January 2026, with the exception of residential construction and the clean energy sector.
Why this matters: Small businesses rely on apprenticeships to build their workforce, but are already facing low completion rates and a shortage of crucial skills. The Council of Small Business Organizations Australia warns that these sudden cuts will discourage employers from taking on apprentices during peak employment seasons, threatening Australia’s long-term skills pipeline.
Small business groups are calling on the federal government to reverse its decision to cut funding for apprenticeships across multiple sectors, warning the cuts will discourage employers from hiring apprentices amid Australia’s ongoing skills crisis.
From January 1, 2026, the enhanced financial incentives will only apply to apprentices in the residential and clean energy sectors of the Key Apprenticeship Program. For all other priority professions, support for both apprentices and employers will be halved, as announced on 1 December.
COSBOA chairman Matthew Addison criticized the sudden policy change. “Small businesses rely on apprenticeships to build capabilities, bring newcomers into their industries and retain a skilled workforce,” Addison said. “Cutting incentives in half with just four weeks’ notice will deter employers from taking on apprentices at a time when many are already struggling to find staff. It is short-sighted, poorly timed and risks long-term damage to Australia’s skills pipeline.”
The Australian Restaurant & Café Association has already announced that employers in the hospitality industry predict a reduced intake of apprentices in 2026. The Association warned the changes will create winners and losers in key service industries and risk driving young Australians away from professions already facing severe labor shortages.
Chefs are especially vulnerable. James Goodwin, CEO of Accommodation Australia, told HM Magazine that current incentives are already less than what it costs venues to train a chef from scratch.
“The simple fact is that we already don’t have enough chefs to meet demand, especially in regional areas,” Goodwin said. “The proposed new incentive structure coming into effect from January 1, 2026 will see these payments halved. This couldn’t come at a worse time with the number of trainee chefs already down by 10 percent.”
The automotive sector is also concerned. Michael Wentworth, director of Sydney group training organization Apprenticeships Are Us, said the cut was devastating for small employers.
“That’s devastating for a lot of small businesses,” he said. “It’s shortsighted. It’s unnecessary. I just can’t imagine why they would do that.”
Wentworth, whose organization has a strong presence in the car repair sector, said the move could see many small workshops pull back from training new mechanics.
“We have a major problem finding skilled workers in this country, yet we have cut funding for apprentices. It just doesn’t seem to make sense,” he said.
The Australian Hairdressing Council told COSBOA the timing of the change is devastating, noting January is the peak recruitment period for salons and barbershops. Without adequate incentives, many owners will be less able to hire apprentices, jeopardizing the industry’s future talent pipeline.
The Australian Swim School Association has raised concerns that reduced incentives for Certificate III apprenticeships will make it more difficult for small swim schools to attract and retain staff. Communities are already experiencing a shortage of qualified instructors, a workforce essential to water safety and early childhood development.
The Australian Meat Industry Council advised that apprenticeships for butchers and small goods will be affected, further limiting companies’ ability to attract new entrants to an industry already hit by an aging workforce and limited training pathways.
Mr Addison also criticized the lack of consultation prior to the announcement. “Changes of this magnitude require good collaboration with industry,” Addison said. “Implementing it within a month is unreasonable and shows a disregard for small business planning cycles.”
He said the affected sectors are not isolated cases. “Hospitality, hairdressing, personal services, swimming instruction, car repair, retail, pharmacy, aged care, beauty, childcare and the meat industry are all small business-dominated sectors that rely on apprenticeships,” Addison said. “They are already crying out for skilled workers, and they can only get skilled workers if apprentices are supported from the start.”
COSBOA urges the government to reach out directly to affected sectors and restore fair support across the apprenticeship system.
“Australia cannot afford a two-speed skills system,” Addison said. “Every sector contributes to our economy and communities. Every sector deserves a strong, well-supported apprenticeship pipeline. We urge the government to immediately reconsider these changes.”
As a result of the changes, employers of apprentices in the Key Apprenticeship Program professions will receive up to $5,000, paid in two installments during the first year. For apprentices in other professions on the priority list, the maximum full-time payment will be reduced from $5,000 to $2,500, paid over the first two years.
Incentive payments for apprenticeships that began before January 1, 2026 will not be affected by the changes.
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