Australia, we STILL need to do better for Family Business

I’ve previously written about how Australia needs to do more to support family business.

Depending on which survey you are looking at, family businesses comprise up to 70% of all businesses in Australia and provide up to 55% of all private sector employment. Yet the only serious attention given to this vital sector occurred 10 years ago with the Parliamentary Joint Committee inquiry into Family Business in Australia which made a number of recommendations, mostly agreed to in principle by the Federal Government, but not acted upon. A couple of examples:

• Government agreed “in principle” that the Australian Bureau of Statistics (ABS) should be tasked to gather data to help identify the size and nature of Australia’s family businesses, as a precursor to development of supporting policy. This has never happened due to a weird “Catch 22” situation whereby the ABS requires evidence that family businesses are a sufficiently significant sector to warrant the collection of this data…evidence which only the collection of relevant data could provide; and
• Establishment of the Australian Small Business & Family Enterprise Ombudsman which effectively lumps family businesses into the bargain bin of small businesses rather than recognising and supporting family business as a unique and diverse business sector.

Family businesses face many unique challenges requiring support. Most get by based on the collective experience of the previous generations of family owners, and on the goodwill and enthusiasm of the rising generation, but they need educational support in many areas including effective family and business governance, transition planning and conflict management. Currently this support is completely self-funded by member-based organisations such as Family Business Australia. Yet this only covers a very small portion of the total family business population.

Australia’s taxation laws also make it difficult if not impossible for a family to manage generational ownership transition without incurring potentially enormous taxation cost. The most tax-effective succession plan for Australian family owners is to die and leave the business ownership to successors via their wills. As a result, with a few exceptions, many of our best-known family companies are being sold to the highest bidder which often tend to be financiers or international conglomerates with little interest in maintaining the legacy that the previous family owners had fought so hard to protect.

Other world governments are far more prominent in recognising the importance of family businesses including Malta which established a Family Business Act in 2016, and more recently the United Arab Emirates enacted its family business law in January 2023 aimed at doubling the economic contribution by UAE family businesses over the next 10 years. Elsewhere the European Commission has a long history of providing fully-funded family business research and support in member countries.

In Australia, we have a long way to go despite the obvious importance of the family business sector to our economy.