Where is the best place in Australia to run a small business? Our new ranking has a clear answer, and a few surprises

It is one of the questions small-business owners ask us most: is it easier to run a business in some parts of the country than in others?

Until now, the honest answer has been "it depends", backed by anecdote rather than evidence. Our first State Performance Report changes that. It ranks all eight states and territories using published data from the Australian Bureau of Statistics, ASIC and state and territory revenue offices, and it does so for three readings: 2024, 2025 and an interim 2026 reading.

The result is the first consistent, like-for-like picture of where conditions are working for small business, and where they are working against it.

Western Australia ranks first in every year analysed. Its 2026 score is 79.4 out of 100, well clear of the Northern Territory (64.0) and Queensland (58.3).

WA did not get there on a single measure. It leads all three pillars of the index and has the fastest net growth in its business population (4.6%), the lowest insolvency rate in the country (29.8 per 10,000 businesses), the largest fall in insolvency appointments (down 10.7%) and the fastest population growth (2.1%).

In other words, more businesses are starting, fewer are failing and there are more customers arriving every year. That combination is hard to beat.

Here is how the eight jurisdictions rank in the interim 2026 reading:

Look closely and three patterns stand out.

The top is stable. Western Australia has led throughout, while the Northern Territory has climbed from fourth to second on the back of the highest business entry rate in the country (18.5%), the strongest state final demand in the June quarter (+1.4%) and the highest payroll tax threshold ($2.5 million).

The bottom is also stable. Victoria and Tasmania have been in the bottom three in every reading.

The middle is where things move. South Australia and the ACT were second and third in 2024. In 2026 they are fourth and fifth, while Queensland has risen from fifth to third.

For many readers, the biggest surprise will be the position of the two largest economies.

New South Wales ranks sixth. Its insolvency appointments fell 5.7%, but June-quarter demand was flat, population growth of 1.1% trails Victoria, Queensland and Western Australia, and its insolvency rate (56.9 per 10,000 businesses) is the second-highest in the country.

Victoria ranks seventh. It recorded the weakest June-quarter demand of any jurisdiction (down 0.3%), the highest unemployment rate (5.1%) and a four-year business survival rate of 60.1%. Its payroll tax threshold of $1.0 million is also the lowest of the eight, tied with Western Australia.

None of this means businesses cannot succeed in Sydney or Melbourne. Victoria is still the second-largest market for customers in the country. But it does mean owners in these states are, on average, working against stronger headwinds than their counterparts in the west and north.

Tasmania ranks eighth, yet it has the highest four-year survival rate in the country (65.0%) and the second-lowest insolvency rate.

So why is it last? Because the index rewards growth as well as resilience. Tasmania has the lowest business entry rate (13.3%), the slowest population growth (0.6%) and weak net growth in business numbers (1.9%). Businesses there tend to last, but fewer are starting and the customer base is growing slowly.

It is a useful reminder that a ranking is a summary, not a verdict.

This is where the report becomes genuinely practical.

A café, trade or retail business depends on customers who live nearby, so population growth, local demand and employment matter most. An online, professional or location-independent business can serve customers anywhere, so survival rates, insolvency pressure and payroll tax matter more.

The report therefore re-weights the same twelve indicators for those two kinds of business, and the order changes:

• Western Australia and the Northern Territory hold first and second place under both weightings.
• Tasmania jumps from eighth to fifth for a business that can serve customers anywhere, because its strong survival and low insolvency rates carry more weight.
• South Australia rises to third for the same type of business.
• The ACT falls to seventh, as its high payroll tax rate and the lowest four-year survival rate in the country (59.7%) count for more.

If your business does not rely on foot traffic, the "best" place to operate may look quite different from the headline table.

We built the State Performance Report to be transparent and repeatable. It uses twelve published indicators grouped into three equally weighted pillars:

• Business Starts and Growth: entry rate, net growth, the ratio of new businesses to closures, and formation intensity.
• Business Survival and Demand: survival, insolvency rate, change in insolvencies and state final demand.
• Population, Jobs and Payroll Tax: population growth, unemployment and payroll tax thresholds and rates.

Each indicator is scaled from 0 to 100 across the eight jurisdictions, so the scores are relative. A score of zero means the lowest of the eight on that measure, not an absence of activity. The 2026 result is an interim reading, combining the 2025-26 annual data with the latest unemployment, demand and population figures available at the time of publication.

The index does not yet capture energy and fuel costs, which the report covers separately, and it measures conditions rather than how any individual business will perform.

The ranking shows where the tailwinds and headwinds sit. Industry, customers, location within a state and the way a business is run matter at least as much as the state or territory itself.

For owners, the value lies in context. If your state sits near the bottom, it can help explain why the past year has felt harder than it should have, and where to focus your effort. If your state sits near the top, it shows which conditions are working in your favour and which could change.

For policymakers, the message is equally clear. The table is a list of where small business needs the most help.