Tax complexity costs SMEs 11+ hours annually in lost productivity, with paper documents and regulatory navigation as primary obstacles.
Small business owners are drowning in tax preparation, with new research showing one in four spending more than 11 hours on their annual returns, time that could otherwise drive revenue and growth.
Despite this massive time investment, fewer than 18% feel confident about filing accuracy, creating a dangerous combination of resource drain and compliance risk.
The findings, from Adobe’s 2025 Tax AI Survey, expose a critical productivity challenge facing Australia’s small business sector. While large corporations deploy dedicated accounting teams and sophisticated software, SMEs often rely on manual processes that consume precious time and deliver uncertain results.
The real cost of tax complexity for small business
The 11-hour figure represents just the tip of the iceberg for many small business owners. This time comes directly from activities that generate revenue, customer service, product development, marketing, and strategic planning. For a sole trader charging $100 per hour, those 11 hours represent $1,100 in lost income, before considering the opportunity cost of delayed business activities.
“Whether it be a time-poor professional or small business operator, when you don’t have the resources or understanding to comb through complex rules and regulations, one overlooked detail can lead to costly mistakes,” said Narelle Behn-Carey, Principal Digital Strategist, Digital Media Enterprise, APAC at Adobe. “It’s no wonder that tax time leaves many feeling overwhelmed and underprepared.”
The research identifies managing paper documents, organising materials for tax professionals, and navigating complex rules as the primary obstacles. For small businesses operating with limited administrative support, these challenges compound operational stress during an already demanding period.
Seven in 10 small business owners prioritise filing taxes early and correctly, recognising the cash flow benefits of quick refunds and the risks of penalties. However, the confidence crisis, with only 18% feeling certain about accuracy, suggests many are operating in a constant state of uncertainty about their compliance status.
AI tools promise efficiency gains, but adoption lags
The survey reveals a striking paradox, while 80% of small business owners recognise AI’s potential for tax preparation, actual implementation remains limited. More than half believe AI tools could simplify the process by organising and navigating documents (53%) and consolidating materials (51%).
This recognition suggests business owners understand the solution to their problems exists, they’re just not accessing it. The gap indicates potential barriers including cost concerns, technical complexity, or uncertainty about which tools deliver genuine value versus marketing hype.
“AI-driven platforms such as Acrobat AI Assistant with its contract intelligence capability has potential to transform how people approach tax time, helping them file their returns more accurately and confidently,” Behn-Carey noted. “Some taxpayers are already seeing AI’s potential, but there is opportunity for more people to harness its potential to their advantage.”
Beyond tax season: year-round business benefits
The document management and analysis capabilities that could streamline tax preparation offer broader business applications. Small businesses that struggle with tax document organisation likely face similar challenges with contract management, regulatory compliance, and financial reporting throughout the year.
AI tools capable of summarising documents, digitising receipts, and organising materials could transform how small businesses handle administrative tasks beyond tax season. Contract intelligence features, for example, could help SMEs better understand supplier agreements, lease terms, and client contracts, areas where many small business owners lack legal expertise.
The research suggests that businesses successfully implementing AI for tax preparation could gain competitive advantages through improved efficiency, reduced compliance risk, and freed-up time for strategic activities. Early adopters may be positioning themselves for sustained operational benefits that extend far beyond annual tax filing.
Practical steps for SME implementation
For small business owners looking to reduce their tax preparation burden, the survey findings suggest several actionable approaches. Digital document organisation throughout the year, rather than scrambling during tax season, emerges as a critical first step. Businesses that maintain organised digital records can significantly reduce the time spent locating and sorting materials.
The widespread recognition of AI benefits among business owners suggests market readiness for technological solutions. However, successful implementation likely requires tools specifically designed for small business needs rather than enterprise-grade solutions that may be overly complex or expensive.
The confidence gap revealed in the research, where massive time investment doesn’t translate to filing certainty, suggests many businesses would benefit from tools that provide accuracy validation and compliance checking, not just document organisation.
Strategic implications for business operations
The tax preparation challenges highlighted in Adobe’s research reflect broader operational inefficiencies that may be hampering small business productivity and growth. Businesses spending 11+ hours on tax preparation while lacking confidence in accuracy face systemic administrative challenges that likely impact other areas of operation.
For the broader small business ecosystem, these findings suggest significant opportunities for productivity gains through better tool adoption. The time currently consumed by manual tax preparation could be redirected toward customer acquisition, product development, and strategic planning, activities that drive business growth rather than merely maintaining compliance.
The research indicates that Australia’s small business sector may be significantly underutilising available technology solutions, potentially limiting competitiveness and growth prospects in an increasingly digital economy.
For more information, visit www.adobe.com
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