Only 1 in 4 Aussie Small and Medium Businesses Have Fully Embraced AI

Only 25 per cent of Australian small and medium enterprises are using artificial intelligence, according to new research by Delwood Advisory with support from Employment Hero, Google, Deputy, and the Tech Council of Australia. That’s despite global research showing that 94 per cent of international SMEs using AI experience a boost in productivity.

The “Accelerating AI Impact For Small and Medium Enterprises” report reveals a steep divide in adoption across Australia. Only 5 per cent of surveyed SMEs use AI broadly across their operations. Adoption in regional areas stands at just 16 per cent, compared with 30 per cent in metropolitan centers.

Despite the low current uptake, the financial incentive is significant: An average SME transitioning from no AI usage to broad adoption could see an annual productivity gain worth $136,000.

According to Deloitte enterprise surveys and regional research on the subject, major barriers to adoption across sectors include legacy infrastructure, risk and compliance concerns, talent and skills shortages, and a lack of trust in the technology.

Respondents to the “Accelerating AI Impact For Small and Medium Enterprises” report identified five key adoption roadblock themes, including a lack of confidence initial AI investments will “pay off”, uncertainty about AI’s relevance to their businesses, workforce skill gaps, limited organisational trust and risk appetite, and technical readiness.

Ben Thompson, co-founder and CEO of Employment Hero, said AI can help address the administrative burden that bogs down small business owners.

“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,” Thompson said. “The report puts broad adoption at $136,000 a year for the average SME.”

Thompson noted that Employment Hero uses AI internally across its operations, where product teams ship features faster, marketing teams test campaigns in days rather than weeks, and AI agents handle 95 per cent of routine HR support queries.

“Specific examples like that are what an owner can copy this week,” Thompson added. 

“The report shows where owners get stuck. Many don’t know where to start, and regional adoption is about half the metro rate. 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.”

Employment Hero’s 2026 AI Paradox Report found a generational perception divide, too, with Gen Z (18 to 28 years) more likely to frame AI upskilling as their own personal responsibility compared with Boomers (62 years plus) who were more likely to see this development as their employers’ responsibility. 

Unprecedented pace of AI technological change

Unlike previous technological shifts such as web, mobile, or software, the AI transition is evolving at an unprecedented speed. For vendors, no standardized, off-the-shelf AI stack exists, with adoption fundamentally reshaping knowledge work, decision-making, and team roles.

Research from the report also shows Australian businesses are lagging global peers in Singapore, Canada, and the United States when it comes to AI adoption, where the share of SMEs using AI more broadly is closer to 50 per cent. 

To address these hurdles, the authors recommend expanding practical AI training, industry-specific advisory services, and targeted support for regional businesses and low-adoption sectors.

Investors are also pushing for more local proactivity around both individual and organisational AI use. Maxine Minter, a general partner at Co Ventures, has publicly emphasized that Australians must proactively retool at both individual and organisational levels rather than passively react to received technological changes. 

For AI native owners and workers, the rate of change is somewhat easier to metabolise, but for SMEs with longer standing practices and operational procedures, injecting significant change into their ways of doing business is more a process of mindset, skills, and capacity building. 

Companies like Notion and Canva have taken to running regular pop ups to support business owners with AI upskilling. Similarly, the Tech Council of Australia alongside Employment Hero is hosting an SME owner and operator focused AI event on Friday, October 23 at the Sofitel Sydney Darling Harbour. The event will offer guests live demos and real-world AI use case studies.