Ask a café owner in suburban Melbourne what the cost of running a small business in Australia looks like in 2025-26, and she’ll give you a figure. It won’t be right. The superannuation rate went up in July. The minimum wage rose the same month. Workers’ compensation premiums climbed. Energy costs are higher than two years ago. Economists and journalists have examined each of these in isolation, and the policy debates are well-worn. Nobody has put them together for a representative employing business and shown what they cost across one financial year. Most operators haven’t run that calculation. The difference between what they assume and what the numbers show is the kind that turns up in the bank account.
the employment cost stack
Take a representative employing business. Café, trade service, or small retail operation. Four employees, two full-time and two part-time, with a combined payroll of around $280,000 a year. Nothing exotic. The kind of business that accounts for the majority of employing firms in this country.
In the 2025-26 financial year, that business faces four mandated cost increases arriving inside twelve months.
The superannuation guarantee rate moved from 11.5 per cent to 12 per cent on 1 July 2025. On a $280,000 payroll, that 0.5 percentage point step adds roughly $1,400 to the annual super bill. Not a crisis on its own. But it follows the increase twelve months prior, and the one before that, in a series of legislated steps that have added three percentage points since 2021. The cumulative hit is not the same as the annual increment.
The Fair Work Commission’s 2025 minimum wage determination added 3.5 per cent to the national minimum from 1 July. For businesses with minimum wage workers, and most small hospitality and retail operators have at least some, that increase flows through every applicable award rate. On two part-time employees at minimum wage, it adds close to $1,800 for the year.
Workers’ compensation premiums have risen across most jurisdictions, partly because sustained increases in average weekly earnings push up the income base against which claims are calculated. Operators in labour-intensive industries have seen premium increases of between five and twelve per cent over the past two years. The exact figure depends on state, industry, and claims history.
Energy costs for commercial users remain above their 2022 baseline in most states.
Put those four lines together for the representative business. The combined increase lands somewhere between $8,000 and $14,000 compared with two years ago, depending on energy exposure and jurisdiction. On a business turning over $800,000 with a net margin of six per cent, that range represents between 17 and 29 per cent of annual profit. That is where the real cost of running a small business in Australia currently sits, and most of what is written about it addresses one line at a time.
overhead and compliance costs
A small employing business running quarterly BAS lodgements, Single Touch Payroll, and year-end payroll summaries will spend $3,000 to $6,000 a year on external bookkeeping and accountancy. The upper end applies when transaction volume is high or when the owner has no capacity for routine data entry. That range has moved up as accountants absorb the same wage pressures their clients do.
Workers’ compensation insurance sits on top. A $200,000 payroll in New South Wales attracts a base rate of around 1.4 per cent for many common industry classifications, around $2,800 before any claims history loading. Victoria’s WorkCover scheme raised premiums in 2024-25 following years of scheme deficit; some industry classifications absorbed increases above 40 per cent in a single adjustment.
Public liability insurance for a small retail or hospitality business runs $1,500 to $3,500 annually, depending on turnover and premises.
The item most often missing from these calculations is time. Fair Work record-keeping requirements oblige businesses to issue payslips within one working day of payment, retain wage records for seven years, and document ordinary and penalty rates separately across any applicable award. A business with five part-time staff across multiple shifts can spend two to three hours a week on this alone, before factoring in roster compliance, leave accrual tracking, or any entitlements query from staff.
When commentators discuss the cost of running a small business in Australia, they tend to reduce compliance to a line item and move on. The hours don’t compress. A business owner knows where those hours go, even when the published cost models don’t show them.
the 2025-26 shock year
The financial year beginning July 2025 delivered four separate cost increases to employing businesses in Australia. Each one carried a policy rationale. None of them waited for the others.
The superannuation guarantee rate moved from 11.5 to 12 per cent, completing the final step of the phased increase that began in 2021. The Fair Work Commission handed down its annual wage decision, flowing through to award-covered workers. Workers’ compensation premiums rose across most states. Energy prices, after softening in late 2024, climbed again through the first half of 2025 for commercial users.
Put those together for a representative employer: five part-time staff on award wages, a total wages bill around $240,000. The super rate increase adds roughly $1,200. An award wage rise in the 3 to 3.5 per cent range adds between $7,000 and $8,500. Workers’ compensation, at typical rates for a retail or hospitality classification, adds another $1,500 to $2,500. Energy cost increases for a small commercial premises contribute $2,000 to $3,500 more, depending on usage.
Cumulative range: $11,700 to $15,700 in additional annual costs. On a $240,000 wages base, that is a 5 to 7 per cent increase in total employment costs in a single year, from obligations outside the operator’s control.
The costs of running a small business in Australia have always included employer obligations like these. The 2025-26 year concentrated several of them into the same twelve months. The combined figure is one most operators have not sat down to calculate.
the timing problem
The ATO has published the superannuation guarantee schedule for years. The Fair Work Commission runs its annual minimum wage review every June. Energy price adjustments follow their own regulatory timetable. Operators could, in theory, have seen each of these coming.
The calendar is the problem. In 2025-26, the super rate moved to 12 per cent, the minimum wage rose 3.75 per cent, workers’ compensation premiums in several states lifted on revised claims data, and electricity costs sat well above pre-2022 levels. Each trigger runs on a different clock. The super change rolls in on 1 July. The wage order flows through in the first pay run of the new financial year. Insurance renewals land on their own schedule.
The cost of running a small business in Australia has always carried this structural feature: multiple obligations, each indexed to a different regulator, each arriving on its own schedule. In 2025-26, they converged. Fair Work’s annual wage review accounts for wages, not super, not energy, not insurance. No single regulator sees the full stack. The operator has to add it up. The evidence suggests most have not.
Closing / key takeaways
Modelling the true cost of running a small business in Australia takes work in any year. In 2025-26, several obligations converged: a super guarantee rate at 12 per cent, a minimum wage increase, workers’ compensation adjustments, and energy price rises. Together, they can push a profitable business into loss without anyone making a bad decision. No regulator calculates the combined figure. That falls to the operator.
Key points:
- Every increase is documented somewhere. The problem is consolidation, not disclosure.
- No single regulator sees the full cost stack. Operators who skip the cumulative calculation do not have an accurate picture.
- Run the cumulative model before renewals arrive, not after.
Frequently Asked Questions
What is the actual cost of employing someone in Australia in 2025-26?
The base salary is the starting point, not the finish line. On top of wages, a standard employing small business is carrying superannuation at 12 per cent (up from 11.5 per cent as of 1 July 2025), payroll tax if wages exceed state thresholds (which vary by jurisdiction), workers' compensation premiums, and leave entitlements. A full-time employee on the national minimum wage carries a total employer cost that runs materially higher than the base rate alone once those statutory obligations are factored in. The number most small business operators quote when asked what a staff member costs is usually the wage. The real number is rarely that.
Why is 2025-26 particularly difficult for employing small businesses?
Because several significant cost increases landed in the same financial year rather than being staggered. The superannuation guarantee rate moved to 12 per cent on 1 July 2025, the minimum wage increased from the same date, workers' compensation premiums in most states have risen to reflect higher claims activity and elevated award rates, and energy costs remain well above their pre-2022 baseline. Any one of those in isolation is manageable. The problem is that operators are absorbing all of them simultaneously, in a consumer environment where passing cost increases through to prices carries real risk of losing the customer rather than protecting the margin.
How does payroll tax work, and when does it start applying?
Payroll tax is a state-based tax on wages above a set exemption threshold. The thresholds and rates differ by jurisdiction, which creates genuine complexity for businesses operating across state lines. In New South Wales the threshold sits at $1.2 million; in Victoria it is $700,000. If your total Australian wages, including contractors classified as employees for payroll tax purposes, exceed the threshold in your state, you pay tax on the excess. The contractor provisions catch a lot of small business operators off guard, particularly in trades and professional services. Each state revenue office administers its own scheme independently, so operating across multiple states means multiple compliance obligations.
What does the cumulative impact actually look like for a typical small business?
It depends heavily on workforce size, industry, and cost structure. But modelling a representative employing business, say a retail or hospitality operation with four or five staff at or near the minimum wage, the combined effect of the superannuation increase, the wage rise, and the workers' compensation movement adds several percentage points to the total employment cost base in a single year. For a business running on thin margins, which describes most small businesses in those sectors, that is not an abstraction. It is the difference between a viable trading position and a genuinely difficult one. The ABS data on employer exits is consistent with that reading.
Where should a small business owner go to understand their full cost position?
The most reliable starting point is a conversation with an accountant who works at your scale, not a calculator on a government website. Those tools handle individual statutory obligations reasonably well but rarely capture the interaction effects across superannuation, payroll tax, and workers' compensation, or the cash-flow timing of when each obligation falls due. The Fair Work Commission publishes updated minimum wage rates, the ATO provides superannuation guarantee guidance, and state revenue offices publish payroll tax thresholds. Reading each separately gives you the components. Adding them up against your actual payroll, and understanding what they mean for your specific trading position, requires real numbers and someone who can model the scenario properly.
