If you’re running your own business in Australia, you’re in good company. A recent count performed by the Australian Bureau of Statistics shows that in June 2025, there were more than 2.72million businesses operating across the country.1
While Australia has its fair share of big operations, the majority of the nation’s enterprises are small businesses2 – and understanding whether you’re one of them matters for a bunch of different reasons,3-5 including whether you’re eligible to take out small business insurance.
So, to help you work out if you’re a small business owner and get your head around why it can be an important thing to know, we’ve put together this guide to answer a few common questions.
H2 What is a small business in Australia?
It can depend on who you ask and why you’re asking, but Australia’s Fair Work Commission says that a business with less than 15 people is considered a small business.3
This can include people who are employed:3
- Full time
- Part time
- On a casual basis.3
H3 Can revenue also affect what is considered a small business?
Yes. And this is where the small business definition shifts a little, depending on the official source you’re consulting – and why you want to know, which is something we’ll explain below.
The Australian Government’s Office of the Australian Information Commissioner says that a small business is one with an annual turnover of $3million or less.4
This means that in some circumstances, you could be a small business no matter whether you have two, 20 or 200 staff,6 as long as your annual turnover is under the $3million threshold.4
H3 What is a small business entity and is it the same thing as a small business?
It can be, but the main thing to know about the term “small business entity” is that it’s a classification used by the Australian Taxation Office (ATO) to decide whether a small business will qualify for certain tax concessions.5,7
A small business entity is either:8
- A small business that has an aggregated annual turnover of less than $10million, where aggregated turnover is your annual turnover plus the annual turnovers of any businesses you’re connected with or an affiliate of
- A small business that’s not linked with any other business and has an annual turnover of less than $10million.8
H2 Why does a small business definition matter?
As we’ve outlined above, there are a few different official definitions of what a small business is, and they can all come into play for slightly different reasons. Some of these include:
H3 The rules you have to follow if you want to dismiss an employee
If your business employs fewer than 15 people, the process for fair dismissal – or in other words, legally letting someone go – is different to the rules that larger businesses need to follow.3,9
The process is outlined in the Fair Work Commission’s Small Business Fair Dismissal Code. The code isn’t a free pass to let someone go without reason, but it recognises that small businesses don’t have the same resources as larger ones and therefore provides them with a simpler dismissal process.10
The Small Business Fair Dismissal Code includes a checklist to help small business owners comply with the process.10
H3 Whether or not you’re eligible for tax concessions
The small business entities we outlined above may qualify for a range of tax concessions from the ATO.5
This may include concessions such as:5
- Simplified depreciation rules
- Simplified trading stock rules
- The choice to account for GST on a cash basis
- Immediate deduction for a range of business start-up expenses.5
H3 If your business is covered by the Privacy Act
Australia’s Privacy Act regulates how businesses and government agencies handle people’s personal information.11
Businesses covered by the Privacy Act have specific legal obligations around collecting, using and storing customers’ personal data.12
Most small businesses with an annual turnover of $3million or less aren’t covered by the Privacy Act, although there are a few exceptions, such as health service providers and businesses that trade in personal information.4
There’s an official checklist you can use to help you decide if your small business needs to comply with the Act.4
H2 What type of business can a small business be?
A small business could be any type of business, including if you work from home, sell products online or use your vehicle to offer services.6
Small businesses can also operate under a variety of business structures,8 which define how a business operates.13
The structure you choose might depend on the size of your business and how you want to run it, and can have an impact on your set-up costs, tax obligations and asset protection.13
Here’s a bit more information about four common small business structures.
H3 Sole trader
This is the simplest type of business structure and is relatively easy and inexpensive to set up.14
As a sole trader, you’re legally responsible for all aspects of the business, but you can hire employees to help you.14
A sole trader business structure:
- Has fewer tax reporting requirements than some other business structures14
- Allows you to use your individual tax file number to lodge tax returns14
- Has unlimited liability, which means all your personal assets – including your home, savings and investments15 – can be at risk if things go wrong.14
H3 Partnership
A partnership is made up of two or more people who manage the business together and share any income or losses.16
Each state and territory has its own partnership laws, but generally speaking:16
- There are three main types of partnerships – general, limited and incorporated limited – which determines how much liability each partner has for business debts and obligations
- A partnership needs its own tax file number and Australian Business Number (ABN)
- Each partner pays income tax on their share of the partnership’s income.16
H3 Company
A company is a separate legal entity. Its members aren’t liable for company debt, although directors may be held liable if they’ve breached their legal obligations.17
Relatively expensive and complicated to set up, a company also:17
Involves larger running costs than other types of business structures
Means the money the business earns belongs to the company
Requires you to complete an annual review and an annual company tax return.17
H3 Trust
A trust is a business structure where a trustee carries out the business on behalf of the trust’s members.18 A trustee can be a person or a company.18
As a general rule, trusts:18
- Can be expensive and complex to set up and operate
- Require a formal trust deed that outlines how the trust operates
- Can be difficult to dissolve or make changes to once established.18
H2 How does insurance for small businesses work?
There are a number of different types of business insurance.19
Depending on the small business you’re running, you might be legally required to have:19
- Workers compensation insurance, if you have employees
- Public liability insurance, which is mandatory for certain occupations
- Professional indemnity insurance, which is mandatory for some professions
- Compulsory Third Party (CTP) insurance, which is required if your business uses motor vehicles.19
Other types of business insurance, including policies that cover your stock and equipment for damage or loss, or your liability if one of your products causes an injury or property damage, are optional.19
You may also decide to get public liability insurance even if it’s not mandatory for your business.20
This type of insurance covers your business if someone gets injured or their property gets damaged because of your negligence,19 and may be useful for any type of business that interacts face to face with customers.20
H3 What types of small business does Youi Small Business Insurance cover?
“At Youi, we cover a wide range of small businesses, everything from hospitality businesses to trades and home-based businesses,” says Mervyn Hartley, Youi’s Head of Product – Home and Small Business.
Suitable for a small business that employs fewer than 40 people and has an annual turnover of no more than $2million, Youi Small Business Insurance automatically includes public liability insurance and products liability insurance.21
“From there, a number of optional types of cover may be available for the small business owner to add to their policy for an additional cost, such as professional indemnity,22 business items,23 and business property damage cover,”24 says Hartley.
Now that you know how the various small business definitions can impact your operations, you may wish to start looking into the right insurance to fit your needs. To learn more about the cover provided by Youi Small Business Insurance, consider giving our dedicated Small Business team a call on 1300 010 648 or starting a quote online.
1Source: Australian Bureau of Statistics – Counts of Australian Businesses, including Entries and Exits, August 2025
2Source: Australian Small Business and Family Enterprise Ombudsman – Number of small businesses in Australia, n.d.
3Source: Fair Work Commission – What is a ‘small business’?, n.d.
4Source: Australian Government Office of the Australian Information Commissioner – Small business, n.d.
5Source: Australian Taxation Office – Appendix 13: Small business entity concessions, May 2022
6Source: Australian Competition & Consumer Commission – Small business, n.d.
7Source: Sprintlaw – What Is a Small Business Entity (SBE) in Australia?, May 2025
8Source: Australian Taxation Office – Small business entities, May 2022
9Source: Fair Work Ombudsman – Unfair dismissal, n.d.
10Source: AKYRA – Crossing The 15-Employee Line – What Changes For Your Business?, June 2025
11Source: Australian Government Office of the Australian Information Commissioner – The Privacy Act, n.d.
12Source: Qld Government Business Queensland – Protecting privacy and information in your business, October 2024
13Source: Australian Government Business – Choose your business structure, n.d.
14Source: Australian Government Business – Sole trader, n.d.
15Source: Marsh & Partners – ATO compliance essential for sole traders, February 2025
16Source: Australian Government Business – Partnership, n.d.
17Source: Australian Government Business – Company, n.d.
18Source: Australian Government Business – Trust, n.d.
19Source: Australian Government Business – Types of business insurance, n.d.
20Source: Business Victoria – Find the right insurance, n.d.
21Public and Products Liability cover automatically included in Small Business Insurance policies. Conditions, limits and exclusions apply. For full details, see the PDS & Policy Wording.
22An additional cost applies for optional covers. Conditions, limits and exclusions apply. For full details, see the PDS & Policy Wording.
23Business Items cover is optional and an additional cost applies. Conditions, limits and exclusions apply. The most we will pay for each item is $2,500, up to a total of the Business Items amount noted on your policy schedule per claim, unless a High Value Business Items amount is noted on your policy schedule, in which case the most we will pay for all items with a replacement value of more than $2,500 is the High Value Business Items amount shown on your policy schedule.
24Business Property Damage cover is optional and an additional cost applies. 25Conditions, limits and exclusions apply. For full details, see the PDS & Policy Wording.
