Figure 1 shows some of the definitions of a ‘small business’ used in Commonwealth legislation. Figure 1: Statutory definitions of small business in Commonwealth legislation Act and section Application to small businesses Test of whether an entity is a small business Australian Securities and Investments Commission Act 2001, section 12BC Deems small businesses to be consumers for the purposes of Part 2, Division 2 of the Act, which deals with certain consumer protections in relation to financial services That the business employs less than 20 employees or, if the business is a manufacturing business, the business employs less than 100 employees Australian Securities and Investments Commission Act 2001, section 12BF Provides that a standard form contract in relation to financial products and services where one party is a small business will be void if it meets the test for being ‘unfair’ That the business employs less than 20 employees, and the upfront price payable under the contract does not exceed $300,000, or if the contract has a duration of more than 12 months, the upfront price payable under the contract does not exceed $1,000,000 Figure 1: Statutory definitions of small business in Commonwealth legislation (continued) Act and section Application to small businesses Test of whether an entity is a small business Competition and Consumer Act, Schedule 2, section 23 Provides protections against unfair contracts to small businesses in relation to goods and services, and interests in land That the business employs less than 20 employees and the upfront price payable under the contract does not exceed $300,000, or if the contract has a duration of more than 12 months, the upfront price payable under the contract does not exceed $1,000,000 Corporations Act 2001, Deems small businesses to That the business employs
section 761G be retail clients in relation to insurance and ‘other’ financial products or services for the purpose of Chapter 7 of the Act, which deals with the regulation of financial services and markets less than 20 employees, or, if the business is a manufacturing business, the business employs less than 100 employees Australian Small Business and Family Enterprise Ombudsman Act 2015, section 5 The Act provides for an Ombudsman with advocacy and assistance function in relation to small and family businesses That the business employs less than 100 employees or the business has less than $5 million in revenue in a year Fair Work Act 2009, section 23 Alters the unfair dismissal provisions of the Act That the business employees less than 15 employees Income Tax Assessment Act 1997, section 328110 Provides access to certain concessional treatments in the tax laws That the business has an annual turnover of less than $10 million Figure 1 shows that one common legislative approach used in Commonwealth legislation is to define businesses that employ less than a certain number of employees as small businesses. However, this definition is not consistent across all purposes for which small businesses are defined in legislation. There are almost no legislative references in Commonwealth legislation to ‘medium-sized businesses,’ which indicates that the Parliament has not granted differential treatment or special protections to medium-sized businesses. The only reference identified is in the Fair Work Act 2009, and is an acknowledgement in the Objects of the Act of the ‘special circumstances of small and mediumsized businesses.’ For statistical purposes, the Australian Bureau of Statistics (ABS) defines an entity employing less than 20 employees as an SME, and a medium-sized business as a business employing between 20 and 199 employees. Characteristics of SMEs Some limited data on the size and composition of the SME sector in Australia is available. Additionally, there is some data that shows the economic contribution of SMEs to the Australian economy.
The ABS’s Selected Characteristics of Australian Business measure the proportion of businesses that are currently franchisees. The ABS data also disaggregates that data according to the number of employees of the franchisee. Table 3: Per cent of businesses that are franchisees, 2015-16 Per cent Franchisees as a percentage of businesses with: 0–4 employees 2.4 5–19 employees 7.7 20–199 employees 9.7 200 + employees 6.2 Franchisees as a percentage of all businesses 4.5 Source: ABS, 8167.0 Selected Characteristics of Australian Business, various years. Note: The ABS survey measures the proportion of businesses that are in a ‘franchisee relationship’. Table 3 shows that franchisees are most likely to have between 20 and 199 employees, and be defined as medium-sized businesses by the ABS. Accreditation of franchise systems by banks or other lenders appears to be relatively common in the franchising sector in Australia. According to Westpac: A bank accreditation enables a potential franchisee looking to buy a franchise to borrow 40 to 70 per cent of the total set up costs of a new franchise, or purchase costs of an existing franchise business. The Westpac and ANZ websites provide a list of currently accredited franchises systems by each of those entities. Other business organisation considerations Real estate as security Small business lending is often intermingled with the personal finances of the business owner; particularly the residential property of the business