Australian businesses are focusing on people, marketing, and workplace efficiency in FY2025-26, with 91% planning non-capital investments to drive growth while managing risk.
According to new research from Small Business Loans Australia (SBLA), hiring, training, and modest workplace upgrades are emerging as top spending priorities amid tightening profit margins and rising operating costs.
The findings come as small businesses face a wave of financial pressure, including a 3.5% minimum wage hike and an increase in the superannuation guarantee to 12% from July 1. Despite this, many SMEs are still planning to grow, with 63% optimistic about the year ahead, according to CommBank.
SBLA’s nationally representative survey of 200 business owners and decision-makers found that employee upskilling (35%) and new hires (31%) topped the list of non-capital spending plans.
Other popular areas of non-capital investment include product or service development (23%), marketing and advertising (22%), and customer experience improvements (16%).
“Business owners are making hard decisions about where to allocate limited funds – and our research shows there is a clear preference for investment that drives efficiency, customer acquisition and workforce capability,” said Alon Rajic (pictured), founder of SBLA.
While fewer businesses plan to invest in large capital assets, many still see value in tech and workplace upgrades. The most common capital investment areas include technology and IT hardware (38%), office furniture and fittings (28%), machinery and equipment (22%), and motor vehicles (13%).
These trends signal a shift toward spending that supports hybrid work transitions and operational efficiency, rather than long-term or high-cost assets. One in 10 businesses also plan to invest in sustainable assets, likely to address energy efficiency and compliance.
Despite a still-healthy $155.9 billion in forecast capital investment across the economy this year, ABS reported a 0.1% fall in private capital expenditure for the March quarter, driven by a decline in plant and machinery spend.
SBLA’s survey found that tight profit margins (43%), cash flow constraints (26%), and debt repayments (17%) are the top internal barriers to capital investment. Externally, high energy costs (30%), rising interest rates (24%), and economic uncertainty (22%) are the most commonly cited deterrents.
“The rising cost of running a business which uses high-quality products is tough,” said Justine Dalrymple, a Sydney small business owner. “We can’t cut costs, and we can’t pass rising costs on to the customer.”
ScotPac and Equifax have also flagged increasing insolvency risks, with a 23% rise in business collapses so far this year – mostly among micro businesses. Equifax data shows trade credit demand is down 13.8% and late payments are up, suggesting more small firms are under cash flow stress.
Rather than pull back completely, Australian businesses are showing a more strategic and selective approach to spending in FY26.
“The good news is that businesses aren’t necessarily slowing down - they’re choosing those investments that have faster returns and lower risk. Businesses are making more selective and considered decisions about how they’ll grow this financial year,” Rajic said.
CommBank noted that businesses are using tactics like automation, outsourcing, and software reviews to offset rising expenses. And while interest rate cuts have been welcomed, the recovery in consumer spending remains slow, keeping business caution high.
The full FY26 capital investment report from Small Business Loans Australia is available here: smallbusinessloansaustralia.com
