Johann Oberholzer is the founder of financial management app Sole. In this piece, he highlights how more needs to be done to recognise the contribution of sole traders to the Australian economy.
About 97 per cent of businesses in Australia are small businesses and a significant portion of these are made up of freelancers and sole traders.
Yet these types of businesses barely rate a mention in the ongoing political and economic conversation.
Trends suggest sole trader and freelancer numbers are on the rise, and they are becoming a force to be reckoned with in the business and political landscape. According to the latest ABS data, there was a 2.4% per cent increase in sole proprietors in 2023-24, bringing the total number up to 803,607 sole traders in total.
Sole traders are important contributors
Though these non-employing businesses don’t directly create jobs, they contribute a diverse range of goods and services to consumers, directly boost their local economies, create diversity in the market, and bolster innovation and entrepreneurialism. Small businesses, which include sole trader and freelance businesses, add an estimated half a trillion dollars to Australia’s economy, making up a third of its GDP in total.
As more companies enforce return-to-office policies, Australian workers are choosing to strike out on their own for a chance to be their own boss and enjoy freedom away from the traditional 9-5 work model.
Technology plays a role in this, with a range of tools arming professional workers with fully remote capabilities and leaving them with the power to choose more interesting and challenging work, more time to spend with their loved ones, and greater flexibility to apply their skills in a way that is fulfilling to them.
Why are sole traders left out of the conversation?
The benefits of being self employed often come with a slew of challenges, which are made more difficult by the lack of specialised support for freelancers and sole traders alone. Despite their growing numbers, sole traders and freelancers are still being routinely left out while small businesses and corporations take centre stage.
This is evident in the way sole traders are barely acknowledged when it comes to the raft of initiatives being rolled out to support SMEs and the way policymakers create legislation with larger entities in mind. Plenty of grants and programs exist to nurture the growth of SMEs, but few are specific to sole traders and freelancers.
At the same time this agile and independent workforce are facing increased scrutiny from the ATO thanks to the actions of a few bad actors. Sole traders don’t enjoy the same level of representation or advocacy that bigger business entities do, but they still have to navigate the same amount of administrative work and red tape to run their business. From onerous tax obligations and insurance requirements to invoicing and chasing payments, the bureaucratic burdens fall heavily on the shoulders of solo businesses.
This heightened scrutiny comes with a side of ATO court action over unpaid debts as the organisation firmly sets its sights on everyone from pure sole traders to those with a side job or two looking to make ends meet due to cost of living pressures. Compliance with rigorous accounting standards and managing cash flow is tough for businesses of any size, but it’s especially tough on sole traders who are forced to wear many different hats in the course of running their business.
More needs to be done
As more Australians turn to independent work, more needs to be done to create a network that recognises and supports their unique challenges and contributions. With this there are plenty of opportunities for both business and government to take the lead. The good news is rising awareness of this cohort will take us closer to realising the untapped potential of freelancers and sole traders, sooner rather than later.
