Rising costs, compliance burdens and mental health impacts: the 2025 Small Business Perspectives Report surveyed 800 owners about what’s really happening.
What’s happening: More than 800 Australian small business owners reported declining profits, rising costs and significant personal financial strain in the 2025 Small Business Perspectives Report from COSBOA and CommBank.
Why this matters: The findings reveal the extent to which small business owners are absorbing economic pressures personally rather than passing costs on.
Australian small business owners are working longer hours, managing rising costs and carrying personal financial risk at levels that suggest the sector’s resilience is being tested more severely than in recent years.
The 2025 Small Business Perspectives Report, released by the Council of Small Business Organisations Australia (COSBOA) and Commonwealth Bank, surveyed more than 800 small business owners across the country about their experiences over the past 12 months.
Profits decline sharply
The most significant finding: 64% of small businesses reported lower profits than the previous year, a sharp increase from 40% in 2024. This decline is translating into direct personal impact, with 60% of owners unable to pay themselves at least occasionally. One-quarter regularly dipped into personal savings to keep their businesses operating.
“Small business owners are working harder than ever to keep up with rising costs, workforce shortages, regulatory complexity and the relentless pace of digital disruption. Many are dipping into their savings or delaying their own pay to stay afloat, yet they continue to adapt, innovate and serve their communities,” said Matthew Addison, COSBOA Chair.
High operating costs emerged as the single largest barrier to growth, with 72% of respondents citing rising business costs as their primary obstacle to expansion. Nearly three-quarters expect costs to increase again over the next 12 months.
The compliance burden
Regulatory compliance is consuming significant time and resources. Many owners spend more than six hours per week on regulatory tasks, with compliance ranking among their top five business expenses. This administrative load comes alongside workforce shortages and what business owners describe as high wage expectations relative to their capacity to pay.
“Behind every statistic is a business owner balancing risk, carrying personal financial responsibility, and navigating a system that often feels stacked against them,” Addison said.
The personal cost of these pressures is reflected in concerning mental health statistics: 76% of respondents reported experiencing stress or anxiety, whilst 57% experienced burnout. These figures suggest that the economic pressures facing small businesses are translating into significant wellbeing impacts for the individuals running them.
AI adoption rises
Despite these challenges, the report found evidence of adaptation. Of the small businesses using artificial intelligence, 46% said it had improved their business in some way, pointing to efficiency gains from technology adoption.
Business satisfaction remains relatively strong, with 63% of small business owners satisfied with their decision to start their business. Purpose, independence and community connection were cited as strong motivators for continuing.
Rebecca Warren, Commonwealth Bank’s Executive General Manager for Small Business, noted cautious optimism emerging despite the challenges.
“While the operating environment is tougher and more complex than ever, small business owners remain committed to their staff, customers and communities. Their determination continues to inspire us,” Warren said.
“Encouragingly, in my conversations with small businesses, 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.”
Nearly half of respondents (45%) expect customer demand to improve over the next 12 months, reflecting cautious optimism about future growth despite current pressures.
The report highlights policy areas where COSBOA believes intervention could shift outcomes for small businesses, including fairer taxation, targeted skills support, digital investment and regulatory simplification.
“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.
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