EXPLANATORY NOTES

INTRODUCTION

1 This release presents counts of businesses based on snapshots of actively trading businesses as at June 30, 2012, 2013, 2014, 2015 and 2016 from the Australian Bureau of Statistics Business Register (ABSBR). It contains counts and rates of business entries and exits from the Australian economy as well as counts of the survival of businesses.

2 Most businesses in Australia need to obtain an Australian Business Number (ABN). These businesses are then included on the whole of government register of businesses, the Australian Business Register (ABR). The ABS uses information from the ABR as well as data supplied by the Australian Tax Office (ATO) to populate its internal register of businesses, the Australian Bureau of Statistics Business Register (ABSBR). CABEE data is extracted from the ABSBR. The data supplied to the ABS is provided under the Taxation Administration Act 1953 and A New Tax System (Australian Business Number) Act 1999. Under the Census and Statistics Act 1905, this data can only be used for the purpose of carrying out the functions of the ABS.

3 Further information regarding these Acts can be found at the Federal Register of Legislation website. Information about the ABR can be obtained from the ABR website and the ATO website.

4 Legislative requirements to ensure privacy and confidentiality of these data have been followed. Only people authorised under the Australian Bureau of Statistics Act 1975 have been allowed to view data about any particular firm in conducting these analyses. Results have been confidentialised in accordance with the Census and Statistics Act 1905, to ensure that they are not likely to enable identification of a particular person or organisation.

STATISTICAL UNIT

5 In mid 2002, the ABS commenced sourcing information for the ABSBR from the ABR and at that time changed to a two population model. The two populations are known as the profiled population and the non-profiled population. The main distinction between businesses in the two populations relates to the complexity of the business structure and the degree of intervention required to reflect the business structure for statistical purposes.

6 The vast majority of businesses included on the ABSBR are in the non-profiled population. Most of these businesses are understood to have simple structures. After some system processes are applied to a unit registered for an ABN, the resulting statistical unit s a good approximation satisfying ABS' statistical requirements. For these businesses, the ABS statistical units structure directly aligns with the ABN unit: one ABN equates to one business.

7 For a relatively small number of businesses, the ABN unit is not suitable for ABS economic statistics purposes and the ABS maintains its own units structure through direct contact with businesses. These businesses constitute the profiled population. This population typically consists of large, complex and diverse groups of businesses. An Enterprise Group (EG) is a statistical unit covering all the operations within Australia's economic territory of legal entities under common control. Control is defined under Corporations legislation. Majority ownership is not required for control to be exercised.

8 A Type of Activity Unit (TAU) covers all the operations within an Enterprise Group that belong to one industry subdivision and for which there are a minimum set of economic data items available. Where a business cannot supply adequate information for each industry, a TAU is formed containing activity in more than one industry. These TAUs are classified according to the industry of the main activity. TAUs may have operations in one or more states / territories.

9 The unit referred to as a 'business' thus consists of ABNs from the non-profiled population and TAUs from the profiled population. For a comprehensive definition of a business, refer to the Glossary.


SCOPE

10 Counts of businesses produced from the ABSBR are comprised of actively trading businesses in the Australian economy. Actively trading businesses are:

• TAUs from the profiled population (where activity is monitored via direct contact with the business)
• ABNs from the non-profiled population that are actively remitting in respect of a Goods and Services Tax (GST) role.

Limiting the scope to only businesses with a GST role means that only entities that are actively trading in goods or services are included. Business entities with a turnover below $75,000 do not have to register for GST and hence those who have not registered will not be included in these counts. Entities not considered to be actively trading in the market sector are not considered to be businesses and, as such, are also excluded from these business counts.

11 Businesses that have not submitted a Business Activity Statement (BAS) and/or have reported zero dollar amounts over five consecutive quarters (or three consecutive years for annual remitters) are treated as 'long-term non-remitters' (LTNRs). These businesses are not considered to be actively trading and are excluded from the counts as they are not remitting GST.

12 Units on the ABSBR have been classified according to the Standard Institutional Sector Classification of Australia (SISCA) 2008, Type of Legal Organisation (TOLO) and Australian and New Zealand Industry Classification (ANZSIC) 2006. These classifications are used to determine whether a business unit is in scope of CABEE.
Entities classified to the following categories of SISCA are excluded:

• 2110 Reserve Bank of Australia
• 3000 General Government
• 5000 Non-Profit Institutions Serving Households
• 6000 Rest of the World.

Entities classified to the following TOLO categories are excluded:

• 12 Charitable Institution
• 15 Social and Sporting Clubs
• 16 Trade Unions and Other Associations
• 20 Other Unincorporated Entity
• 41 Diplomatic or Trade Missions
• 42 Other Foreign Government.

Entities classified to the following 4 digit ANZSIC classes are excluded:

• 6210 Central Banking
• 7711 Police Services
• 7713 Fire Protection and Other Emergency Services
• 9540 Religious Services
• 9551 Business and Professional Associations
• 9552 Labour Association Services
• 9559 Other Interest Group Services n.e.c.
• 9601 Private Households Employing Staff
• 9602 Undifferentiated Goods-Producing Activities of Private Households for Own Use
• 9603 Undifferentiated Service-Producing Activities of Private Households for Own Use.

13 The exclusion of the General Government institutional sector particularly impacts on counts for the Public Administration and Safety, Education and Training, and Health Care and Social Assistance ANZSIC divisions (O, P and Q respectively). The business counts in these divisions include private sector and public corporation activity only.

14 Most unincorporated entities (sole proprietors; partnerships) are included in the households sector. Some unincorporated businesses are excluded from CABEE because these are operated/controlled by the General Government or Non-Profit Institutions Serving Households (NPISH) sectors that are out of scope of CABEE.


COVERAGE

15 In addition, the scope for business counts includes some businesses that are yet to be coded by the ATO to an industry, sector and/or main state of operation. Analysis conducted on these businesses indicates that, despite not having a complete set of classificatory data, these businesses were actively trading and also met the other scoping criteria of the collection (refer to the Conceptual and Practical Basis for Counts section for further details). It was therefore considered appropriate that they be included within scope of CABEE. These actively trading businesses have been grouped together into Currently Unknown codes in the data cubes.

16 There are actively trading businesses that have not registered for an ABN because they do not have any obligations under the Goods and Services Tax (GST) legislation. For example businesses that have turnover that is under the threshold for registration (currently $75,000) may choose not to apply for an ABN. These businesses have not been identified or quantified and are not included in the counts presented in this release.

17 Counts for ‘Currently Unknown’ categories are included in the publication for completeness (to ensure that totals match the sum of the associated categories). However rates involving 'currently unknown' values are not published to ensure administrative changes are not misinterpreted.


COMPARABILITY WITH FRAMES FOR ABS BUSINESS SURVEYS

18 The basis for business counts in this release is broadly consistent with that used for frames in most ABS business surveys. There are two exceptions to this:

• The scope with regard to industry, sector, or type of legal organisation can vary according to the requirements of the survey. In some cases, classifications excluded from these business counts are included in a survey frame in order to measure a particular part of the economy more comprehensively. Other survey frames may only include a subset of these classifications such as excluding businesses with invalid ANZSIC codes. Most frames currently include employing businesses only.
• Most survey frames include entities with a tax role to withhold income tax from their employees (ITW role) but without a GST role. There are approximately 41,000 such entities. Investigations indicate that units with an ITW role but no GST role are likely to be part of a complex business structure. Such entities are excluded from these counts as they are not considered to be actively trading in goods and services. For business surveys designed to, amongst other things, provide estimates of wages and salaries paid (irrespective of whether the entity is actively trading or not), it is important that these entities are included on frames.

REFERENCE PERIOD

19 Counts of businesses provided in this CABEE publication are based on annual snapshots of the ABSBR as at 30 June each year from 2012 to 2016 (inclusive).


TIME SERIES

20 While data presented in this release were produced on a broadly similar conceptual basis to data presented in previous releases, users seeking to analyse change over time should be aware that there have been methodological, classificatory, definitional, administrative and content changes across the nine releases of CABEE. Depending on the analysis being undertaken, these changes could adversely affect the comparability of CABEE data over time, and users are advised to consult the webpages of relevant releases to understand the nature and impact of such changes.

21 Caution should be exercised when comparing geographical data in this release with geographical data in previous releases. The Australian Statistical Geography Standard (ASGS) replaced the Australian Standard Geographical Classification (ASGC) in 2011. A further update to the ASGS was released in July 2016 in Australian Statistical Geography Standard (ASGS): Volume 1 - Main Structure and Greater Capital City Statistical Areas, July 2016 (cat. no. 1270.0.55.001) which left National and State based data unchanged but boundaries for some small area level data moved. Refer to appendix Australian Statistical Geography Standard (ASGS) 2016 Changes in this publication for further information.

BUSINESS EVENTS
22 This release contains snapshots of counts of active businesses at regular points in time. These snapshots are also used to identify businesses that are entering and exiting the Australian economy, as well as those businesses that continue to survive. The movement of businesses between the profiled and non-profiled populations can have an impact on business entry and exit counts, though this is usually minor.

23 In 2013-14, the ABS undertook maintenance activity to improve the recording of businesses with agriculture related activity that resulted in units moving between the profiled and non-profiled populations. The net impact was to increase the number of businesses operating in June 2014 by 383 which represented less than 2% of the 20,496 increase in businesses operating in June 2014 compared with June 2013. These movements inflated the 2013-14 business entry rate from 13.5% to 13.7% and the 2013-14 business exit rate from 12.5% to 12.7% because they were counted as business exits and entries. The effects of the movements were more pronounced for the Agriculture, Forestry and Fishing industry, the household sector, and partnerships, because the movements were concentrated in these business subpopulations. For example, the movements reduced the decrease in Agriculture, Forestry and Fishing industry businesses during 2013-14 from 2.1% to 2.0%, increased this industry's 2013-14 business entry rate from 6.4% to 8.4%, and increased its 2013-14 business exit rate from 8.5% to 10.4%.


ENTRIES
24 A business entry is defined as a business which is actively trading on the business register at 30 June in the reference year but was not actively trading at 30 June the previous year.
This may occur when

• a business registers for an ABN with a GST role,
• a GST role is assigned to an existing ABN that did not previously have this role
• a business recommences remitting BAS data after a period where they had become a Long Term Non Remitter (see paragraph 11)
• a business recommenced its GST role after it had been cancelled
• a business unit moves between the profiled and the non-profiled populations.

EXITS

25 A business exit is defined as a business which was actively trading on the business register at 30 June in the previous year, but was not actively trading as at 30 June in the reference year. It is important to note that a business exit does not necessarily equate to a business failure. A business exit may occur when

• a business cancels its ABN or GST role
• when the business ceases to remit GST for at least five consecutive quarters (or 3 consecutive years for annual remitters)
• a business moves out of or in to the profiled population
• a business is sold and the ABN changes
• a business is taken over or involved in a merger

SURVIVALS

26 A surviving business is defined as a business that is active on the ABSBR at 30 June of the current year and was also active at 30 June of the previous year.
In this release, two types of survivors are recorded.

• businesses that were on the ABSBR at 30 June 2012 and were still on the ABSBR at 30 June 2013, 30 June 2014, 30 June 2015 and 30 June 2016.

and survival of entries:

• businesses that were entries in 2012-13. That is, they were not on the ABSBR at 30 June 2012 but were on 30 June 2013. The survival of these businesses is measured in terms of whether they were still on the ABSBR at 30 June 2014, 30 June 2015 and 30 June 2016.

27 For business survival data cubes, changes in employment and turnover size ranges are not considered. That is, surviving businesses will remain classified to their original base year classification even when they have expanded or contracted.


INTRA-YEAR ENTRIES AND EXITS

28 It is possible that a business can enter after 30 June in a given year and exit before 30 June in the following year. A small number of these instances occur in any given year. These businesses will not be included in the data in this publication.


DATA QUALITY

29 These counts are not subject to sampling error as they represent a complete enumeration of economically active businesses on the ABSBR. However they are subject to non-sampling error and the cyclical administrative workflows of the ATO may impact on data interpretability. For further information on this and other likely sources of error in this release, refer to Quality Declaration - Summary.


INDUSTRY

30 Each business (either an ABN unit or TAU on the ABSBR) has been classified to a single ANZSIC 2006 industry class, irrespective of any diversity of activities undertaken. The industry class allocated is the activity which provides the main source of industry value added (sales of goods and services, wages and salaries or number of employees as a proxy), which is generally based on a description provided by the business. For comparability, the ANZSIC code that a business was classified to as of July 2016 is the code that is used for that business for all years in this publication. For further information on ANZSIC 2006, see the Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 (cat. no. 1292.0) on the ABS website.


ASGS AUSTRALIAN STATISTICAL GEOGRAPHY STANDARD (ASGS)

31 The Australian Statistical Geography Standard (ASGS) brings together in one framework all of the regions which the ABS and many other organisations use to collect, release and analyse geographically classified statistics. The ASGS ensures that these statistics are comparable and geospatially integrated and provides users with a coherent set of standard regions so that they can access, visualise, analyse and understand statistics. The ASGS has been used for the collection and dissemination of geographically classified statistics since 1 July 2011.

32 In July 2016, an update to ASGS was released. The new release includes boundary changes and additional Statistical Area Level 2 (SA2) areas. For the first time it also includes the Territory of Norfolk Island within the 'Other Territories' category along with Jervis Bay Territory, the Territory of Cocos (Keeling) Islands and the Territory of Christmas Island.

33 CABEE has moved to this updated classification for the 2012-2016 release. More information about the SA2s including correspondences between ASGS 2011 and ASGS 2016 can be found in Australian Statistical Geography Standard (ASGS): Volume 1 - Main Structure and Greater Capital City Statistical Areas, July 2016 (cat. no. 1270.0.55.001).


STATISTICAL AREA LEVEL 2

34 SA2s are medium-sized general purpose areas built up from whole SA1s. Their purpose is to represent a community that interacts together socially and economically. SA2s are the base spatial units used to disseminate ABS business counts data. There are 2,310 SA2 regions covering the whole of Australia without gaps or overlaps. These include 18 non-spatial SA2 special purpose codes, comprising Migratory-Offshore-Shipping and No Usual Address for each State and Territory. SA2 data can be aggregated to larger geographical areas, including SA3, SA4, Greater Capital City Areas (GCCSA), and States and Territories, as part of the ASGS.

35 The issues of geocoding multi location businesses are more pronounced for count data at the SA2 level, as multi location businesses (businesses registered under a single ABN/TAU but operating in more than one location) will only be attributed to a single SA2. As such, care should be taken not to assume that business counts at the SA2 level reflect all business operations within that SA2. For further information, refer to Quality Declaration - Summary.

36 The update of ASGS in July 2016 has resulted in a greater number of SA2s in this publication than in previous releases. This is due to population growth across Australia and the design of SA2s to contain 3,000 - 25,000 people, resulting in splits, amalgamations and boundary changes for various 2011 SA2s. See Appendix 2: ASGS Coding and Labelling Changes in Australian Statistical Geography Standard (ASGS): Volume 1 - Main Structure and Greater Capital City Statistical Areas, July 2016 (cat. no. 1270.0.55.001) and appendix Australian Statistical Geography Standard (ASGS) 2016 Changes in this publication for further information on changes.


MAIN STATE

37 Businesses can operate in more than one state or territory. For businesses in the non-profiled population, main state is derived from the main business address. For businesses in the profiled population, main state is the state or territory with the highest employment. Therefore, for some businesses in the profiled population, main state is not necessarily the state or territory of the main business address.

38 The Australian taxation system provides flexibility during the business registration process, as it allows businesses operating in single or multiple states or territories to register on the ABR and report taxation obligations in a variety of ways. For instance, it is possible for a business entity to register for a single ABN regardless of the number of commercial activities it undertakes (sometimes visible in the number of physical shopfronts from which it operates). Alternatively, multiple commercial activities of a single business enterprise may be registered for separate ABNs, depending on the legal structure adopted by the enterprise. Hence, where commercial activities are carried out by a number of different but related entities, each entity may register for a separate ABN. As CABEE defines a business on the basis of an ABN (or TAU in the profiled population), the counts may be regarded as providing partial coverage of businesses in a given state. For further information, refer to Quality Declaration - Summary.


EMPLOYMENT SIZE

39 The technical definition of employing units depends upon whether the unit resides in the profiled or non-profiled population. Employing units are defined as:

• profiled population - all TAUs in scope of CABEE.
• non-profiled population - businesses with an active Income Tax Withholding (ITW) role and which have remitted to the ATO at least once in the preceding five quarters (or three years for annual remitters). This may include a small number of businesses which have ITW roles for purposes other than withholding amounts from wages and salaries, and as such have zero employment.

40 In the profiled population, businesses report employment as the number of persons who receive remuneration in wages or salaries (including working proprietors and working partners), or are paid a retainer fee by their employer. Employment excludes non-salaried directors, volunteers, persons paid by commission only, and self employed persons such as consultants and contractors. Data for the profiled population are collected through direct contact with businesses and reflect a point in time headcount of current employees.

41 In the non-profiled population, payees estimates are updated monthly for those units whose reported payees and/or ANZSIC has changed, and yearly for those units that haven't changed throughout the past two years. The process uses Business Activity Statement wages and salaries information and ABS survey information to bring the counts into closer alignment with the target variable (i.e. number of employees at the end of the financial year). Adjustment factors are calculated, based upon unit record differences between reported employment in ABS business surveys and information from the ATO, including payment summaries. These factors, along with payment summary information, form the inputs into the derived employment variable and, in turn, the employment size range.

42 The methodology used to derive the non-profiled population business counts for employment size changed in the June 2009 to June 2013 edition of CABEE to provide a more accurate representation of the size of businesses. A more detailed description of the methodology and its effects are described in Improved Employment Range (Technical Note) in the June 2009 to June 2013 and June 2010 to June 2014 editions of CABEE.

43 The employment data extracted from the ABSBR are generally suitable for the purposes of attributing an employment size classification to each in-scope business.


ANNUAL TURNOVER SIZE

44 For businesses in the non-profiled population, annual turnover values are based on data reported to the ATO through Business Activity Statements (BASs). For businesses in the profiled population, annual turnover reported via BAS for ABNs is apportioned to the relevant TAU.

45 Where businesses report zero values on their BAS or have failed to report at all, these data are compared with auxiliary BAS data, which are then used for the purposes of assigning annual turnover values for each in-scope business. In cases where auxiliary BAS data are not available, an imputation based on auxiliary ABSBR data (including wages and salaries and employment data) is used.

46 The imputation technique described therefore classifies all in-scope businesses to a single annual turnover size range in CABEE.


REVISIONS

47 The ABS Business Register receives updated information when a business entity reports changes to either the ABR or the ATO, such as a new registration, revised payee information, or when the business entity reports changes in its business structure or activity. These reporting changes can impact upon the business entity's industry classification (ANZSIC), institutional classification (SISCA), legal classification (TOLO), geographic classification (state/territory) or business size (employment or turnover categories). These changes to the register generate revisions to data previously published in earlier editions of CABEE.

48 Some of the revisions to currently unknown categories are attributable to updated classificatory information, such as ANZSIC, SISCA or TOLO, where this information did not previously exist for the business entity.

49 Since the previous CABEE publication the ABS has updated the algorithm that derives the SISCA classifications. As a result of this update a small number of units (less than 1%) will have moved between institutional sectors. Of these movements, the most significant is units moving from ‘Financial Corporations’ into ‘Households’. As such, the counts of ‘Institutional Sector’ for the same reference year in previous publications will not align.


CONFIDENTIALITY

50 A new confidentiality methodology has been implemented for the CABEE 2016 release. The change has been made to enhance the current process and utilise existing ABS infrastructure. The confidentialising process applied is expected to maximise the availability of data without introducing any bias to the counts. It perturbs data in such a way that the data presented at detailed levels will not always be additive. Each component is individually perturbed. The effect on individual cells is minimal.


COMPARISON WITH OTHER BUSINESS COUNTS DATA

51 Estimates of the number of businesses operating in the Australian economy may be derived from a number of sources within the ABS or from non-ABS sources. They may relate to a point in time, or may be average annual data. These estimates will not always show the same results. Variations occur because of the differing data sources, differing definitions of a business, differing scope and coverage as well as variations due to sampling and non-sampling errors.

52 The definition of employing/non-employing in the ABS can also vary according to collection methodology, data sources, and user requirements.

53 Users comparing data from this release with other ABS data should do so with care, as some other ABS data may exclude non-employing businesses or particular industries or sectors. For further details see the Explanatory Notes in the relevant publication.


PREVIOUS RELEASES

54 Information regarding previous releases of CABEE may be accessed on the ABS website.


NEXT RELEASE

55 The next release of CABEE is currently scheduled for February 2018.