Counts of Australian Businesses, including Entries and Exits methodology

Counts of Australian Businesses including Entries and Exits (CABEE) presents counts of actively trading businesses in the Australian economy, as at June 30 for the past five years. The data used to produce these counts are extracted from the Australian Bureau of Statistics Business Register (ABSBR). The ABSBR is populated using administrative data from ABN registrations recorded in the Australian Business Register (ABR), and business data from the Australian Tax Office (ATO). Data on the structures of large and complex businesses are also collected by ABS.

The results in this publication are based, in part on ABR data supplied by the Registrar to the ABS under the A New Tax System (Australian Business Number) Act 1999 and ATO data supplied to the ABS by the ATO under the Taxation Administration Act 1953. These require that such data is only used for the purpose of carrying out the functions of the ABS. In addition, no individual information collected under the Census and Statistics Act 1905 is provided back to the Registrar or ATO for administrative or regulatory purposes. Any discussion of data limitations or weaknesses is in the context of using the data for statistical purposes, and is not related to the ability of the data to support the ABR or ATO’s core operational requirements.

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.

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.

ABS statistics draw extensively on information provided freely by individuals, businesses, governments and other organisations. Their continued cooperation is very much appreciated: without it, the wide range of statistics published by the ABS would not be available. Information received by the ABS is treated in strict confidence and is subject to the requirements of the Census and Statistics Act 1905.

Counts of businesses in this release include only actively trading businesses in the Australian market sector. Actively trading businesses are:

• Type of Activity Unit (TAUs) from the profiled population.
• ABNs from the non-profiled population that are actively remitting Goods and Services Tax (GST).
   

For the purposes of CABEE, a business is defined as a legal entity engaging in productive activity and/or other forms of economic activity in the market sector. Such entities accumulate assets on their own account and/or hold assets on behalf of others, and may incur liabilities.

The economic activities of individuals are excluded (except where an individual engages in productive activity either as a sole trader or in a partnership or trust).

Businesses are considered to be engaging in productive activity where they have a Goods and Services Tax (GST) role and are actively remitting GST through Business Activity Statements (BAS).

The businesses on the ABSBR are separated using 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.

The vast majority of businesses included on the ABSBR are in the non-profiled population. Most of these businesses have simple structures that are suitable for ABS statistical purposes at the Australian Business Number (ABN) level. For the non-profiled population, one ABN equates to one business.

For a small number of businesses, the ABN unit is not suitable for ABS economic statistics purposes and the ABS maintains its own economic units structure through direct contact with businesses. These businesses constitute the profiled population and are represented by Type of Activity Unit’s (TAU’s). This population consists of large, complex and diverse groups of businesses.

A Type of Activity Unit (TAU) consists of one or more business entities, sub entities or branches of a business that can be grouped according to production activity, and can report a minimum set of data items. These TAUs are classified according to the industry of the main activity. The relationship between TAU’s and their associated legal entities (ABN’s) may be one-to-one, many-to-one, or one-to-many.

The statistical unit referred to as a 'business' consists of ABNs from the non-profiled population and TAUs from the profiled population.

Business Activity Statements (BAS) are reports that businesses lodge with the ATO on a monthly, quarterly or annual basis. They include the amount the business earned, the amount of GST collected, the amount of GST credits on goods and services purchased, pay as you go (PAYG) tax instalments and other tax reporting obligations.

A business may still be counted as actively trading at the end of the financial year even if it has ceased operating if the associated ABN has not been cancelled and the business has remitted GST within the last five quarters (or three years for annual remitters).

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.

A business may be classified as a LTNR at the end of the reference period, and therefore be excluded from the count of actively trading businesses in CABEE, then resume remitting GST at a later date. Such a business may have been operating during the period it was classified as a LTNR, despite not remitting GST during this time. These businesses are counted as exits in the reference period they become a LTNR, and again as entries in the reference period they resume remitting GST.

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, and to publish counts.

For comparability, the ANZSIC, SISCA and TOLO codes that a business was classified to as of 30 June in the latest year of the publication are the codes that are used for that business for all years in this publication.

SISCA is based on the System of National Accounts 2008 (SNA08) institutional sector classification. 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
   

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).

For more information users should refer to Standard Economic Sector Classifications of Australia (SESCA), 2008 (cat. no. 1218.0).

TOLO indicates whether a business is part of the private or public sector, and the type of ownership structure it has. Entities classified to the following TOLO categories are excluded:

• 26 Other Unincorporated Entities
• 33 Foreign Government
   

In-scope TOLO classifications are grouped in the data published in CABEE based on the following concordance:

For more information users should refer to Standard Economic Sector Classifications of Australia (SESCA), 2008 (cat. no. 1218.0).

Each business has been classified to a single ANZSIC 2006 industry class. 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.

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

• 6210 Central Banking
• 711 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
   

For more information, users should refer to the Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 (cat. no. 1292.0).

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.

The scope for business counts includes some businesses that are yet to be coded by the ATO to an industry, sector and/or geographical area. 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. These actively trading businesses have been grouped together into ‘Currently Unknown’ or ‘No Usual Address’ codes in the data cubes.

Counts for ‘Currently Unknown’ categories are included in the publication for completeness. However entry and exit rates and change percentage involving 'currently unknown' values are not published to ensure administrative changes are not misinterpreted.

Counts of businesses in CABEE are published at three geographical levels: Main State, Statistical Area Level 2 (SA2) and Local Government Area (LGA). Main State is derived from business information on the ABSBR, while SA2 is part of the Australian Statistical Geography Standard (ASGS).

The ASGS is a framework of all of the regions which the ABS and 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 to access, visualise, analyse and understand statistics.

For more information, users should refer to the Australian Statistical Geography Standard (ASGS) (cat. no. 1270.0).

Businesses can operate in more than one geographical location and be represented by a single ABN/TAU. These are referred to as multi-location businesses. For the purposes of this release, multi-location businesses are attributed to one geographical classification to prevent double counting of businesses. The individual locations of businesses with multiple sites are not available.

The issues of geocoding multi location businesses are more pronounced in counts at smaller geographies, as multi location businesses will only be attributed to a single SA2/LGA. As such, it cannot be assumed that business counts at each geographical level reflect all business operations within that geography.

For businesses in the non-profiled population, main state is derived from the main business address. The main business address of a business relates to the physical address where the main business activity takes place. 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.

SA2s are medium-sized general purpose areas which represent a community that interacts together socially and economically. The SA2 is the smallest area for the release of Australian Bureau of Statistics (ABS) business counts statistics.

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 in the ASGS framework.

SA2 data is only coded for businesses in the non-profiled population. Units in the profiled population (TAU’s) are included in “Currently Unknown” SA2 categories.

LGAs are special purpose areas which do not align directly with the ASGS. Their purpose is to represent a community that is administered by one local government council. LGAs are geocoded using the Geocoded National Address File (GNAF). LGA data is only coded for businesses in the non-profiled population.

Units in the profiled population (TAU’s) are included in “No Usual Address” LGA categories.

This release contains snapshots of counts of actively trading businesses at regular points in time. 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 may have been methodological, classificatory, definitional, administrative and content changes between the different 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 web pages of relevant releases to understand the nature and impact of such changes.

The ABSBR receives updated information when a business entity reports changes to either the ABR or the ATO, such as a new registration, revised classificatory 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) or geographic classification. These changes to the ABSBR may generate updates to data previously published in earlier editions of CABEE.

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

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 also impact on data interpretability. Revisions to data due to non-sampling error or updates to methodology will be included as a technical note on the relevant publication, and available in history of changes.

Counts of active businesses are compared between consecutive years to identify business events, such as businesses that are entering and exiting the Australian economy, as well as businesses that continue to survive.

A Business entry is counted when an actively trading business on the ABSBR at 30 June in the reference year, was not actively trading at 30 June the previous year. A business entry may occur when:

• a business registers for a GST role for the first time.
• a business recommences its GST role after it had been cancelled.
• a business recommences remitting BAS data after a period of becoming a Long Term Non Remitter (LTNR).
• a business moves into, or out of, the profiled population.
   

A Business exit is counted when an actively trading business on the ABSBR at 30 June the previous year is no longer actively trading at 30 June in the reference year. A business exit may occur when:

• all GST roles of a business are cancelled.
• a business ceases to remit GST for at least five consecutive quarters (or three 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.
   

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 financial year. These businesses are not included in this publication.

A surviving business is defined as a business on the ABSBR that is active at 30 June of the reference year and was also active at 30 June of the previous year.

Two types of survival tables are published in CABEE datacubes; businesses that were active in the first year captured by this release, and businesses that entered during the first year captured by this release, and have survived to consecutive years.

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. This is to more accurately reflect the survival rates for businesses in each strata classification.

Due to the nature of business growth/change with respect to location, employment and turnover, the movement between these strata are important characteristics in the classification and movement of businesses. For these variables, businesses are classified according to their size for the respective year for all datacubes and tables except survival tables.

The net movement of surviving businesses is calculated by taking the total inflow at the end of the financial year minus the total outflow at the end of the financial year. These counts are included in datacubes to quantify the change in counts of businesses within a financial year which are attributable to the movement of surviving businesses, not entries and exits to a strata.

The inflow at the end of a financial year is the count of surviving businesses that have moved into one size range out of another size range in a financial year (i.e. an employment or turnover size range). This does not include entries and exits.

The outflow is the count of surviving businesses that have moved out of a size range (i.e. an employment or turnover size range) and into another size range (for employment or turnover). This does not include entries and exits.

A business which employs and pays a salary to (or plans to employ and pay a salary to) one or more persons, is required to register an Income Tax Withholding (ITW) role with the ATO. These businesses are required to withhold payments from salaries and wages from their employees and send the amounts to the ATO.

In the profiled population, businesses report employment to the ABS 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.

All businesses in the profiled population are considered to be employing units regardless of whether they have an active ITW role. TAUs which report an employment count of zero to the ABS are included in the 1-4 or 1-19 employment categories.

For the non-profiled population, businesses with an active ITW role which have remitted to the ATO at least once in the preceding five quarters (or three years for annual remitters) are considered to be employing units.

For these employing units, employment estimates are updated monthly or yearly, using reported BAS wages and salaries information from the ATO, and ABS survey information. These estimates are used to determine the employment size range of a business.

There are a small number of businesses which have an active ITW role for purposes other than withholding amounts from wages and salaries, and therefore have an employee count of zero. These businesses are included in the 1-4 or 1-19 employee categories. Conversely, there are a small number of businesses which do not have an active ITW role, however have an employee count above zero. These businesses are included in the non-employing category.

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

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.

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 methodology page in the relevant publication.

There is a legislative requirement to protect the privacy of businesses and individuals represented in the data published by the ABS. In order to do this, a confidentialisation process has been applied to counts presented in CABEE to ensure no business or individual is able to be identified.

This process 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. That is, component values will not always sum to the total (both horizontally and vertically) due to perturbation. Each cell is individually perturbed, and the effect on individual cells is minimal.

No data in datacube 1 has been subject to perturbation. In datacubes 2-11, all cells may have been subject to perturbation with the exclusion of high level totals. These totals include: industry division, state, employment size, turnover size and Australia totals. These counts are also found in datacube 1, and are included as unperturbed values in datacubes 2-11 to ensure any repeated counts are consistent between datacubes.

There are two known revisions to this release of CABEE:

• Employment size data for 2017-18 has been revised in this release of Counts of Australian Businesses, including Entries and Exits, June 2015 to June 2019. Counts by employment size range for 2017-18 will therefore not align to what was published in Counts of Australian Businesses, including Entries and Exits, June 2014 to June 2018. Please refer to the technical note for further information.
• In past releases of CABEE, businesses which have not reported, or have reported a zero amount, on their Business Activity Statement have been assigned an imputed turnover value. Where auxiliary BAS data were not available for imputation, an imputation based on other ABSBR data was used to determine turnover size range. This method only impacted a limited number of mostly smaller sized units. From 2018-19, these units are assigned a turnover value of $0, and are included in the “zero to less than $50k” turnover size range.
   

• In 2018, there were updates to local government area (LGA) boundaries and the associated meshblock allocations. For comparability, from CABEE 2014-2018, businesses are allocated to LGA’s based on the updated boundaries for all years within the publication.
   

• Two new datacubes were added to this release which present counts of businesses by Local Government Area (LGA) by Industry Division by employment and turnover sizes. These are datacubes 10 & 11 respectively.
• There was a change in the definition of a ‘small business’ used in the Australian Taxation System. Updated turnover size ranges were introduced to CABEE datacubes to reflect this, affecting datacubes 3, 6, 7 and 9. This does not change the raw data, only the strata in which it is presented in the datacubes.
   

• In 2016 the Australian Statistical Geography Standard (ASGS) was updated to ASGS 2016. From CABEE 2012-2016, businesses are allocated to geographical areas based on the ASGS 2016 for all years within the publication.
• A new confidentialisation method was implemented in 2012-16 CABEE. The change was made to enhance the current process and utilise existing ABS infrastructure. The confidentialisation process applied maximises 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.
   

• A new datacube, datacube 1, was added for this release. It includes tables 1-20 which were previously published in the PDF publication download. From this release, the PDF publication will no longer be created, instead the analysis and information can be found on the website.
• The methodology used to derive the non-profiled population business counts for employment size changed in 2009-2013 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 2009-2013 and 2010-2014 CABEE.
• Prior to this release, the strata classification for all variables were held constant for all years within a publication, specifically the latest available data were used to represent a business for all periods within each release of CABEE. Due to the nature of business growth with respect to employment and turnover, it was identified that the movement between these strata are important characteristics in the classification and movement of businesses. From CABEE 2009-2013, for these two variables, businesses are classified according to the size for the respective year. This change resulted in the addition of Tables 14 & 18 to Datacube 1, and the inclusion of “Net movement of surviving businesses” to tables 13 and 17.
   

• Two data cubes were added for this release which present counts of businesses by Industry division by Statistical Area Level 2 (SA2) by business size (employment size and annual turnover size ranges). These datacubes replaced those which previously showed counts of businesses by Statistical Division and Statistical Local Area.
• In June 2010, the ABS implemented a new methodology for identifying annual long term non remitters (LTNRs). These are businesses that have not submitted a Business Activity Statement (BAS) for a defined period of time, and are considered dormant businesses and therefore excluded from the counts. This change has primarily resulted in an increase in business entries, as those businesses who would have previously been excluded have been brought back into scope, and therefore appear as business entries.

The Australian Bureau of Statistics (ABS) receives business information from multiple sources to populate the Australian Bureau of Statistics Business Register (ABSBR), including data from the Australian Business Register (ABR) and Australian Tax Office (ATO). Since the previous release some updated employee payment information for the 2017-18 financial year have become available from the ATO. As a result the classification of businesses in the employment size ranges in 2017-18 did not represent their employment at the time. This issue impacts counts for "Entries", "Net movement of surviving businesses", "Operating at the end of financial year" and "Change" for employing businesses in 2017-18, as well as the associated rates.

In this release of CABEE, the counts of businesses by employment size range for the 2017-18 financial year have been revised in datacubes 1, 2, 8 and 10. The counts by "Employment size range" for the 2017-18 financial year will not align if compared to the previous release.