State of Australian SME Report – October 2025 Edition

The latest ABS Monthly Business Turnover Indicator (August 2025) showed a weaker performance than in previous months, though results remain stronger than the same time last year. This aligns with last month’s decline in business confidence showing business owners acutely felt the impact. 

While annual figures provide the most accurate picture of the economy, small business owners often feel month‑to‑month changes more sharply. The softer August results likely reflect this short‑term sentiment shift. 

Looking ahead, turnover is expected to stabilise through September and October as the effects of the August rate reduction flow through, even though there was no further rate cut in September. As price growth levels out, the broader economy is expected to move into a phase of steady but modest expansion. 

Quick Notes for Advisors: 

• Despite a dip in the most recent data, the overall trend remains positive. 

• Most SMEs are likely to see stronger results than last year, suggesting businesses are moving back into the black rather than the red. If this is not the case for your client/s, it’s time to review their business performance.  

With the recent fluctuations in confidence, ongoing anxiety about global markets, and persistent challenges around costs, cash flow, and workforce shortages, this month we took a deep dive into the Business Owner Mental Load. 

There is currently a lot taking a toll on Australia’s small business owners. Even as the broader economy stabilises, many owners continue to carry a heavy mental load, managing both day-to-day operations and the emotional strain of uncertainty. 

A recent MYOB report (Small Business, Big Resilience, 2025) found that small business owners are 33% more likely to experience burnout than employed workers, with 89% reporting burnout at least sometimes during the past 12 months. The findings highlight that the wellbeing of business owners remains a pressing concern and one often overlooked in economic discussions. 

This mental load is heightened by capability gaps.  

Research shows that only 16% of small business owners hold a business-related qualification, and fewer than 40% feel confident about their financial literacy. Close to half of owners (44%) stated cash flow as their top worry, and 80% have faced cash flow difficulties in the past year. More than half say they want additional training or support, yet small business owners are statistically the least likely group to prioritise their own learning and development. 

The combination of long hours, financial pressure, and limited formal training contributes to decision fatigue and makes it harder for owners to plan ahead. Many are working harder than ever but without the tools or clarity they need to reduce stress and build sustainable operations. 

Support Needed from Advisors 

There is a genuine opportunity for accountants and consultants to play a more proactive role in supporting clients through better business structure and data-driven decision making. Open conversations about mental load can help normalise these challenges and show clients that support is available. 

Advisors can: 

• Start by acknowledging the emotional and cognitive demands of running a business and explore where they can help relieve pressure. 

• Provide practical clarity through financial insight, especially around cash flow forecasting, scenario planning, and benchmarking performance against similar businesses.

• Offer targeted training and advisory services to boost owner confidence in financial management, goal setting, and strategic planning. 

Australia’s business risk environment remains elevated, with financial stress persisting across several sectors despite improved confidence and earlier rate cuts. The latest CreditorWatch Risk Report data shows B2B payment defaults surged 19% in July and remained at that higher level through August, indicating renewed strain on cash flow and the likelihood of further insolvencies in the months ahead. 

Insolvency patterns: high but plateauing 

Insolvencies fell in August, reaching their lowest level in over a year. However, this appears linked more to a decline in Small Business Restructuring (SBR) activity and ATO policy changes than to a genuine easing of credit stress. Construction and hospitality still dominate insolvency numbers, together making up over 40% of all insolvency appointments. 

Early warning signals 

Payment defaults and ATO tax debt defaults are proving to be clear indicators of upcoming distress. Around 26% of businesses with tax debts over $100k became insolvent within 12 months, with an average 235-day lead time. Businesses with four or more registered payment defaults face more than a 50% chance of failure within a year. 

What This Means for Advisors 

For accountants and consultants, the data underscores the importance of early detection and proactive support. With many small firms still exposed to cash flow volatility, advisors can focus on building visibility into client risk profiles and financial performance. 

Practical steps include: 

• Integrating analysis tools to identify stress indicators early can help you identify which clients may be at risk.  

• Prioritising advisory attention to higher risk sectors such as construction, hospitality, retail, and transport. 

• Build your own Business Risk Report so clients can understand if their business is at risk of becoming insolvent.  

Did you know… 

With our Custom Benchmark Reports, you can create automated bulk reports for clients that don’t feel automated. Keen to learn more? Contact us today.   

One of the most valuable programs currently open for SMEs (but closing soon) is the Defence Industry Development Grants (DIDG) Program, a federal initiative supporting small and medium-sized enterprises in building Australia’s sovereign defence capability. 

The program runs across four key streams: 

• Sovereign Industrial Priorities: Supports capital investment in equipment and technology used to deliver defence programs. 

• Skilling: Provides funding for training and workforce development in technical trades. 

• Exports: Helps businesses overcome export barriers and expand into defence supply chains overseas. 

• Security: Assists firms in upgrading physical and cyber security to meet Defence standards. 

Grants range from $5,000 up to $1 million, covering up to 50% of eligible project costs. Applications are open year-round but close soon (31 October 2025 for the Exports and Security streams and 30 November 2025 for the Sovereign Industrial and Skilling streams). So businesses considering expansion or capability upgrades should act quickly. 

Who this applies to: 

• Australian SMEs with fewer than 200 employees 

• Businesses in manufacturing, technology, engineering, or supply chain roles linked to Defence 

• Firms planning to invest in new equipment, upskill staff, improve export capability, or strengthen security compliance 

For advisors, this grant represents an opportunity to identify clients with potential to contract to Defence or adjacent industries. Benchmarking insights can help strengthen applications by demonstrating productivity, capacity, and competitiveness compared with industry peers. 

More details and application guidelines are available via https://business.gov.au/grants-and-programs/defence-industry-development-grants-program