Australian small and medium-sized businesses (SMEs) could unlock up to $93 billion in additional annual economic value over the next five years through greater adoption of artificial intelligence (AI), according to new research from the Tech Council of Australia.
The Accelerating AI Impact for Small and Medium Enterprises report found that an average SME moving from no AI use to adopting the technology broadly across its operations could achieve annual productivity benefits worth $136,000.
However, despite the potential economic benefits, AI adoption among Australian SMEs remains limited. Around one in four businesses currently use AI, while just 5% have adopted the technology broadly across their organisation.
The findings highlight a considerable opportunity for Australian businesses to improve productivity at a time when many are facing rising operating costs, workforce shortages and growing administrative demands.
Research cited in the report found that 94% of SMEs already using AI reported productivity improvements, while 54% of SME employees using the technology reported greater job satisfaction.
The report identified routine administrative tasks as a key area where AI could deliver immediate benefits, particularly for smaller businesses with limited resources. Applications such as payroll processing, employee rostering and recruitment could help reduce time spent on repetitive work, allowing business owners and employees to focus more on customers and day-to-day operations.
Tech Council of Australia CEO Dr Kate Cornick said small businesses were the heart of Australia’s economy.
“Small businesses employ almost two-thirds of Australia’s private-sector workforce. Improving their productivity matters to the whole economy, and this research shows just how substantial the opportunity from AI could be.
“But most SMEs are not yet using AI. Only around one in four is using the technology today, and very few have adopted it broadly across their business. There is a significant gap between what AI could deliver and what small businesses are currently getting from it.
“For a business owner already dealing with rising costs and staffing pressures, even reducing the time spent on routine administration can make a difference. Many need practical advice to work out which applications will be useful and how to introduce them.
“The findings also show why support needs to be better targeted. Regional businesses remain behind their metropolitan counterparts, and some industries face much greater adoption gaps. Government and industry can build on existing programs to help more small businesses put AI to use.”
Regional and Industry Gaps Risk Leaving SMEs Behind
The report also found that AI adoption was uneven across Australian businesses, with regional SMEs and businesses in certain industries facing greater barriers to adoption.
Analysis of 2025 data identified a substantial gap between regional and metropolitan businesses, raising concerns that smaller operators outside major cities could miss out on the productivity benefits of AI without more accessible training and specialist advice.
Adoption also varied considerably between industries, with construction, hospitality and retail recording some of the largest gaps between SMEs and larger enterprises.
While many businesses recognised the potential of AI, limited knowledge of available applications, workforce skills shortages, uncertainty about return on investment and concerns around security and reliability continued to prevent broader adoption.
To address these barriers, the report recommended expanding access to affordable, practical training and expert guidance, supported by industry-specific examples that demonstrate how businesses can introduce AI effectively and responsibly.
Ben Thompson, Co-Founder and CEO of Employment Hero, Foundational Partner for the report, said:
“Ask a small business owner what tasks consume their week and they’ll say payroll, super, awards and compliance. AI takes real weight off that pile. The report puts broad adoption at $136,000 a year for the average SME.
“We know because we’ve done it inside Employment Hero. Our product teams use AI to get through the roadmap faster, so customers get features months sooner. Our marketing team uses it to test and tune campaigns and web pages in days, not weeks. And AI agents now handle 95% of routine HR support questions, so our people spend their time on the hard ones. Specific examples like that are what an owner can copy this week.
“The report shows where owners get stuck. Many don’t know where to start, and regional businesses are still behind cities. You can’t demand change from an owner with no spare hours. Give them practical training, guidance and tools that work, especially in the regions and the sectors furthest behind. Lift small business productivity and you lift the country’s.”
Industry Collaboration to Accelerate AI Adoption
The report was undertaken by Delwood Advisory, with support from Employment Hero, Google and Deputy, and drew on data contributed by Deputy, Xero and LinkedIn.
The initiative brought together technology companies that ordinarily compete to develop a shared understanding of AI adoption among Australian SMEs and identify practical opportunities to improve productivity.
The Tech Council called for government and industry to build on existing support programs, with a greater focus on practical training, accessible advice and targeted assistance for regional businesses and industries where adoption remains low.
Read the full report: Accelerating AI Impact for Small and Medium Enterprises
