Small businesses are sounding the alarm as apprenticeship incentives get slashed in half from January, according to COSBOA Chair Matthew Addison.
What’s happening: The Federal Government will halve apprenticeship incentive payments from January 2026 for most priority occupations, except housing construction and clean energy trades.
Why this matters: Small businesses depend on apprenticeships to build their workforce but already face low completion rates and critical skills shortages. The Council of Small Business Organisations Australia warns these sudden cuts will discourage employers from taking on apprentices at peak hiring season, threatening Australia’s long-term skills pipeline.
Small business groups are calling for the Federal Government to reverse its decision to slash apprenticeship funding across multiple sectors, warning the cuts will discourage employers from hiring apprentices during Australia’s ongoing skills crisis.
From 1 January 2026, enhanced financial incentives will continue only for apprentices in the Key Apprenticeship Program sectors of housing construction and clean energy. All other priority occupations will see support for both apprentices and employers halved, announced on 1 December.
COSBOA Chair Matthew Addison criticised the sudden policy shift. “Small businesses rely on apprenticeships to build capability, bring new entrants into their industries and maintain a skilled workforce,” Mr Addison said. “Halving incentives with just four weeks’ notice will discourage 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 advised that hospitality employers are forecasting reduced apprentice intake in 2026. The Association warned that the changes create winners and losers across essential service industries and risk driving young Australians away from trades already facing severe workforce shortages.
Chef apprenticeships are particularly vulnerable. Accommodation Australia CEO James Goodwin told HM Magazine that current incentives already fall below what it costs venues to train a chef from scratch.
“The simple fact is we already don’t have enough chefs to fill demand as it is, particularly in regional areas,” Goodwin said. “The proposed new incentive structure to operate from 1 January 2026 will see these payments halved. It couldn’t come at a worse time with the number of chef apprentices in training already down 10 per cent.”
The automotive sector is equally concerned. Michael Wentworth, managing director of Sydney group training organisation Apprenticeships Are Us, said the funding cut was devastating to small employers.
“That’s devastating to a lot of small businesses,” he said. “It’s short-sighted. It’s unnecessary. I just can’t imagine why they would do that.”
Wentworth, whose organisation works heavily in the automotive repair sector, said the move could prompt many small workshops to pull back on training new mechanics.
“We’ve got a major issue with trying to find skilled labour in this country, yet we cut the funding for apprentices. It just doesn’t seem to make any sense,” he said.
The Australian Hairdressing Council told COSBOA the timing of the change is devastating, noting that January is the peak recruitment period for salons and barbershops. Without adequate incentives, many owners will be less able to take on apprentices, jeopardising the future talent pipeline of the industry.
The Australian Swim Schools Association raised concerns that reduced incentives for Certificate III traineeship pathways will make it more difficult for small swim schools to attract and retain staff. Communities are already experiencing shortages of qualified instructors, a workforce essential to water safety and early childhood development.
The Australian Meat Industry Council advised that butcher and smallgoods apprenticeships will be affected, further constraining the ability of businesses to attract new entrants to a trade already impacted by ageing workforces and limited training pathways.
Mr Addison also criticised the lack of consultation prior to the announcement. “Changes of this magnitude require proper engagement with industry,” Mr Addison said. “Implementing them within a month is unreasonable and shows a disregard for the planning cycles of small businesses.”
He said the sectors affected are not isolated cases. “Hospitality, hairdressing, personal services, swimming instruction, automotive repair, retail, pharmacy, aged care, beauty, childcare and the meat industry are all small-business-dominated sectors that depend on apprenticeships,” Mr Addison said. “They are already screaming out for skilled workers, and they can only get skilled workers if apprentices are supported from the start.”
COSBOA is urging the Government to engage directly with affected industries and reinstate equitable support across the entire apprenticeship system.
“Australia cannot afford a two-speed skills system,” Mr Addison said. “Every sector contributes to our economy and communities. Every sector deserves a strong, well-supported apprenticeship pipeline. We urge the Government to reconsider these changes immediately.”
Under the changes, employers of apprentices in Key Apprenticeship Program occupations will receive up to $5,000, paid in two instalments during the first year. For apprentices in other priority list occupations, 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 commenced before 1 January 2026 will not be affected by the changes.
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