Australian SMEs are increasing their investment in artificial intelligence, but new data shows the smallest businesses are being left behind, with micro firms reporting significantly lower adoption and investment rates than their larger peers.
The Employment Hero SME Pulse, conducted with research firm GWI, surveyed 600 senior business leaders in Australia between April and June 2026. The quarterly survey tracks AI adoption and investment across businesses of all sizes, from micro firms with fewer than 21 employees to mid-market companies with more than 150 staff.
The headline finding is that 63 per cent of Australian businesses are net increasing their AI investment. But that figure masks a significant divide. Among mid-market businesses, 72 per cent are increasing AI spend. Among micro businesses, the equivalent figure drops to 50 per cent, and one in five are not using AI at all.
Adoption data reveals a clear gap between small and large firms
The gap in AI adoption between micro and mid-market businesses runs across every measure in the survey.
Across all Australian businesses, 39 per cent are using AI at a meaningful scale: 29 per cent at a company-wide enterprise level and 10 per cent running strategic or custom integrations. A further 25 per cent use AI at a departmental level, while another 25 per cent describe their use as limited.
For micro businesses, the picture is notably different. Just 13 per cent report company-wide AI use, and only 4 per cent are running strategic or custom implementations. Some 37 per cent describe their use as limited, and 22 per cent are not using AI in any meaningful way.
Mid-market businesses are operating on a different scale entirely. Some 36 per cent are running AI across the whole business and 14 per cent have built custom or strategic implementations. Just 16 per cent describe their use as limited, and only 6 per cent have no AI presence at all.
The pattern is consistent wherever you look in the data. Smaller businesses are meaningfully behind their larger counterparts at every level of adoption.
Why micro businesses are moving more slowly
Investment intent reinforces the adoption picture. Some 25 per cent of micro businesses report no AI investment at all, compared to just 5 per cent of mid-market firms. Only 9 per cent of micro businesses are increasing AI investment significantly, against 23 per cent of mid-market businesses.
The survey doesn’t ask respondents to explain the gap, but the pattern reflects well-documented dynamics in technology adoption among small businesses.
Micro businesses carry no dedicated IT, operations or HR function. The person assessing whether to adopt an AI tool is often the same person processing payroll, managing customer queries and keeping the books. Finding the time to evaluate, implement and train on new technology takes resources that most businesses under 21 staff don’t have available in the same way larger organisations do.
Cost compounds the problem. Mid-market businesses can spread AI tooling costs across a larger headcount and often already hold enterprise software contracts that include AI features as part of the package. A micro business evaluating a standalone AI product faces a higher cost relative to its size, with fewer staff to distribute efficiency gains across.
There’s also a confidence factor the data implies without stating. Businesses using AI at only a limited level, which describes 37 per cent of micro businesses, may not yet have seen enough tangible return to justify deeper investment. Without a dedicated resource to measure and communicate that return internally, AI can easily remain a peripheral tool rather than a core one.
How the AI gap could set smaller businesses back
The risk for micro businesses is not simply that they’re adopting AI more slowly than their larger peers. It’s that the gap is becoming an operational disadvantage.
Mid-market businesses running AI at an enterprise or strategic level are building automation into core business functions: hiring, compliance management, payroll, customer communication and output generation. Over time, that translates into lower cost per employee, faster cycle times and more capacity for strategic work. Businesses still running these processes manually will find the gap harder to close with each passing quarter.
The direction of investment makes this clearer. Across all Australian businesses surveyed, just 1 per cent are decreasing their AI spend. The field isn’t pausing to let slower movers catch up. Micro businesses that aren’t yet investing aren’t standing still. They’re falling further behind a market that is actively accelerating.
Even among the businesses increasing AI investment, micro firms are doing so more cautiously. Some 41 per cent of micro business leaders are increasing AI spend slightly, compared to 50 per cent of mid-market firms. For significant increases, the figures are 9 per cent and 23 per cent respectively. The pace of investment differs as much as the starting point.
