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QUALITY DECLARATION – SUMMARY

INSTITUTIONAL ENVIRONMENT

The statistics presented in this release have been derived using a combination of data collected directly by the Australian Bureau of Statistics (ABS) under the authority of the Census and Statistics Act 1905, tax data supplied by the Australian Taxation Office (ATO) under the Taxation Administration Act 1953 and Australian Business Register (ABR) data supplied by the Registrar under A New Tax System (Australian Business Number) Act 1999 to the Australian Statistician. The Taxation Administration Act 1953 requires that such data are only used for the purpose of administering the Census and Statistics Act 1905 and the Australian Business Number Act 1999 requires that such data are only used for the purpose of carrying out functions of the ABS.

For information on the institutional environment of the ABS, including the legislative obligations of the ABS, financing and governance arrangements, and mechanisms for scrutiny of ABS operations, please see ABS Institutional Environment.


RELEVANCE

The publication collects information on the counts of Australian businesses, sourcing data from the Australian Bureau of Statistics Business Register (ABSBR). The publication includes information on the entry, exit, growth and survival rates of businesses.

The scope of the publication includes all actively trading businesses which were operating in the Australian economy as at June 2010, June 2011, June 2012, June 2013 and June 2014. It is important to note that entities which are not considered to be actively trading in the market sector are not considered to be businesses and, as such, are excluded from the counts. Please refer to the Explanatory Notes of the publication for further information.

Actively trading businesses are:

• type of activity units (TAUs) from the profiled population (where activity is monitored by direct contact by ABS)
• Australian Business Numbers (ABNs) from the non-profiled population, which are actively remitting in respect of a Goods and Services Tax (GST) tax role.

• industry, in accordance with the Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 (cat. no. 1292.0)
• state, territory and small area geography in accordance with the Australian Statistical Geography Standard (cat. no. 1270.0.55.001)
• institutional sector, in accordance with the Standard Economic Sector Classifications of Australia (SESCA) (cat. no. 1218.0)
• type of legal organisation
• business size (employment size and annual turnover size).

• Businesses with Low Turnover
  From 1 July 2007, businesses with turnover of at least $75,000 per annum ($150,000 in the case of non–profit organisations) were required to register for an ABN and remit GST. Businesses with turnover under $75,000 were able to voluntarily register and these voluntarily–registered businesses are also included in the counts in this release. There are certainly, however, businesses that are actively trading with turnover of less than $75,000 which chose not to register for an ABN or remit GST. The number of businesses in this category is currently unknown to the ABS. Similarly, the same applied prior to 2007 for businesses with turnover of at least $50,000 per annum ($100,000 for non–profit organisations).

• Businesses which have Recently Ceased Trading
  An analysis of recent ABS surveys indicates that a proportion of businesses which have remitted GST within the most recent five quarters of the end of the reference period had in fact ceased operation by the end of the reference period. In many cases, these businesses had not yet been classified as a LTNR business. The exclusion of LTNRs from the counts in this release thus excludes the majority of, but not all, businesses who have ceased trading.

• Businesses which Appeared to have Ceased Trading but are Likely to be Active
  Conversely, investigations show that a relatively small proportion (15% on average) of businesses identified as LTNRs at a point in time (and thus excluded from these counts) recommence remitting at a later date. At this stage, it is not clear whether these businesses were not active during the period (in which case their exclusion provides an accurate count) or were actively trading but failing to remit GST (in which case they were incorrectly excluded).
  
  There are reasons why a business may not respond to the ATO for a period of time and then recommence remitting GST. For example, a business may be in a 'start up' phase with minimal or no activity, could be tax exempt or recalcitrant in reporting over a period of time, or could become dormant while undertaking a change in activity. It would be difficult however to categorise LTNR units which later remit into these groupings without a detailed investigation of each unit.

• Main Business Address
  Businesses can operate in more than one state or territory, and in these cases are classified to their main 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 businesses in the profiled population, main state is not necessarily the state or territory of the main business address.

• Multi–Location Businesses
  The Australian taxation system provides flexibility during the new 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' it may operate). 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.
  
  This publication therefore may be regarded as providing partial coverage of businesses in a given state. For example, if a business registers for a single ABN, but then operates from many physical locations (or 'shopfronts'), coverage will be restricted to the state of the main or 'head office' location only. This is particularly relevant for larger businesses, which commonly establish outlets in numerous states and territories across Australia and also operate from a head office location.
  
  The issues of multi–location businesses are more pronounced for counts at the Statistical Area Level 2 (SA2) level, as multi–location businesses may 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. Users should be aware of this limitation when using counts of businesses included in this publication and should be particularly cautious in equating the number of businesses, represented by ABNs (and TAUs) with the number of business operations.

• Business Size Classifications
  In terms of annual turnover values, annual turnover values are based on data reported to the ATO through Business Activity Statements (BASs) and include imputation for missing periods for all businesses in the non-profiled population. For businesses in the profiled population, turnover reported on BAS for ABNs is aggregated to Enterprise (EN) level and is apportioned to the relevant TAUs. 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.
  
  In terms of employment range values an improved methodology was included in the previous publication to provide the ABS's best estimate of the number of employees at the end of the financial year. This statistical adjustment is based on the most recent and consistent information from surveys, the Australian Business Register (ABR) and the Australian Taxation Office (ATO). Details explaining this methodology are included in Technical Note 2 of the current publication.

• Experimental Estimates, Entries and Exits of Business Entities (cat. no. 8160.0.55.001)
• Australian Bureau of Statistics Business Register, Counts of Businesses – Summary Tables (cat. no. 8161.0.55.001)
• Australian Small Business Operators – Findings from the 2005 and 2006 Characteristics of Small Business Surveys (cat. no. 8127.0).