How much does it cost to start a business in Australia?

Published Monday 2 February 2026

Table of contents

• What is a start-up cost?
• What are the different types of start-up costs?
• How to calculate start-up costs
• Things that affect start-up business costs
• How to reduce start-up costs
• Stay on top of business costs with Xero
• FAQs on business start-up costs

Key takeaways

• Calculate your total startup costs by adding one-time expenses plus 3-6 months of recurring costs as a buffer, since most businesses take time to become profitable and need cash flow protection during the initial period.
• Prioritise essential expenses first and avoid non-essential purchases until you generate revenue, focusing only on what you absolutely need to start trading like core equipment, initial inventory, and legal requirements.
• Choose scalable tools and software that start with basic features and grow with your business, allowing you to keep day-one costs low while planning for future expansion needs.
• Research your specific business type, location, and industry requirements thoroughly, as startup costs vary significantly between retail businesses needing storefronts and inventory versus service-based businesses requiring mainly equipment and professional fees.

What is a start-up cost?

Start-up costs are the initial expenses you need to launch a new business. They include everything from legal fees and equipment to initial inventory and marketing.

Understanding these costs helps you assess whether your business idea is financially viable. It also determines how much capital you need before you start trading.

What are the different types of start-up costs?

Business start-up expenses fall into three categories that help you budget effectively: initial, ongoing, and unexpected costs. Each category serves a different purpose in your financial planning.

Initial start-up costs

These are one-off, essential costs that physically and legally establish your company:

• Business registration fees: Government charges to legally register your business name and structure. In Australia, for example, the fee is $503 or $611 to register a proprietary company.
• Legal fees: Professional costs for contracts, terms of service, and compliance setup. According to the Australian Taxation Office, start-ups can immediately deduct a range of professional expenses, including legal advice.
• Equipment and machinery: Physical tools and technology needed to operate your business. In Australia, some of these capital start-up costs are eligible for a tax deduction over a 5-year period.
• Branding costs: Logo design, website development, and initial marketing materials

Ongoing costs

Ongoing costs are regular expenses that keep your business running day-to-day. They're typically charged monthly or annually and form your operational budget.

Common ongoing costs include:

• Rent and utilities: Office space, electricity, internet, and phone services
• Insurance premiums: Business liability, property, and professional indemnity coverage
• Staff expenses: Wages, salaries, superannuation, and employee benefits
• Inventory costs: Stock replenishment and supply chain expenses
• Marketing spend: Advertising, social media, and promotional campaigns
• Software subscriptions: Accounting, CRM, and business management tools

Unexpected costs

Unexpected costs are unplanned expenses that fall outside your forecasted budget. Examples include emergency equipment repairs, sudden legal fees, or interest rate increases.

Set aside contingency funds so unexpected costs do not disrupt your cash flow. This buffer helps you handle surprises with confidence.

How to calculate start-up costs

Calculating your start-up costs gives you a clear financial roadmap before you launch. Follow these four steps to determine your total investment needed.

Step 1: Identify your essential expenses

Essential expenses are the must-have costs to launch your business. Focus only on what you absolutely need to start trading:

• Core equipment: Machinery, computers, or tools required for operations
• Initial inventory: Stock needed for your first sales period
• Legal requirements:Licences, permits, and mandatory registrations
• Basic marketing: Website, business cards, and launch advertising

Skip non-essential purchases initially; you can add these once you're generating revenue.

Step 2: Categorise your expenses

Categorizing your expenses prevents you from overlooking important costs. Use these six categories to organize your budget:

• Premises costs: Rent, utilities, furniture, and workspace setup
• Equipment and supplies: Computers, machinery, tools, and office materials
• Marketing and branding: Website development, logo design, advertising, and promotional materials
• Legal and compliance: Operating licences, permits, professional legal fees, and regulatory costs
• Staffing expenses: Initial payroll, contractor fees, and employee benefits
• Product costs: Initial inventory, packaging materials, and production supplies

Step 3: Research and compare pricing

Research and comparison helps stretch your startup budget further. Shop around for the best prices and explore financing options that spread costs over time.

Choose scalable tools that grow with your business to reduce upfront investment. Costs vary significantly based on:

• Location: Major city rents cost more than regional areas
• Industry: Some sectors require expensive specialized equipment
• Business type: Retail needs more inventory than service businesses

Step 4: Total your start-up costs

Calculate your total startup costs by adding one-time expenses plus a buffer for ongoing costs:

Total start-up costs = One-time costs + (recurring costs × 3–6 months)

For example, if your one-time costs are $30,000 and monthly recurring costs are $5,000:

• 3-month buffer: $30,000 + ($5,000 × 3) = $45,000
• 6-month buffer: $30,000 + ($5,000 × 6) = $60,000

Why include a buffer? Most businesses take time to become profitable. The longer you can fund recurring expenses, the less likely you'll face cash flow problems before generating sustainable revenue.

If you're in Australia and need help calculating your small business start-up costs, you'll find this free tool useful: Business.gov.au on calculating the start-up costs of your business.

Things that affect start-up business costs

Start-up costs vary significantly based on several key factors that determine your initial investment:

• Business type: Retail, service, or online operations have different cost structures
• Location: Urban areas typically cost more than regional locations
• Industry requirements: Some sectors need specialized equipment or licenses
• Business structure: Sole trader, partnership, or company structures have different setup costs
• Technology needs: Digital businesses require different tools than traditional operations

Your business type

Retail businesses

These businesses sell products directly to customers from a physical storefront.

Retail businesses will likely face higher rents (for a desirable location), utility bills, and storage costs.

For example, a clothing store must budget for a storefront lease, typically in a central location with lots of foot traffic. It then needs to fit out the store with appealing fixtures and lighting, and display lots of inventory in different sizes and styles.

Online businesses

Online businesses sell products or services to customers through digital platforms.

If you're starting an online business, specific costs like website hosting and e-commerce tools are key. Read more in the guide to starting an online business.

Although this typically means they have lower overheads than physical retail stores, they need to invest in a quality website, a secure online-payments platform and a digital marketing strategy to compensate for the lack of foot traffic. They may also need to lease a physical warehouse to store inventory.

Service-based businesses

Businesses that sell services rather than products often have smaller overheads as they don't need a fancy storefront or a large inventory, but will likely spend more on labour, equipment and software, and licensing or certification.

For example, an accountancy firm leases office space, buys fixtures and fittings (like desks and computers) and professional accounting software, and hires skilled employees and contractors.

Here's more information on the differences between online and bricks-and-mortar businesses.

Your location and industry

Major cities or rural areas?

Doing business in major cities typically brings higher rent, wage, and utility costs, as these areas are in high demand with a high cost of living.

But while rural areas tend to have lower rents and wages, you may face higher transport and logistics costs as rural locations are often less accessible and may be further away from your customers.

Niche industries

A business operating in a niche industry generally faces higher upfront costs because it needs specialised equipment, materials, and staff expertise.

For example, a company that makes medical devices needs bespoke machinery, expert-level employees, and materials or components that are difficult to source.

Legal requirements

Some industries, particularly regulated industries, require expensive certifications, permits, and licences that add substantially to upfront costs.

For example, a food and beverage business may need health and safety permits before it can legally trade.

Marketing and branding expenses

Brand identity

Building a strong brand identity is essential for any new business. It makes the business memorable and recognisable, and shapes customers' perceptions of it.

A new business needs to invest in designing a logo and creating a website. It also needs clear brand messaging (such as its value proposition) to differentiate it from the rest of the market.

Digital marketing

Digital marketing is the promotion of your business on social media, email, and search engines.

Digital marketing can increase your initial costs. But it puts your product or service directly in front of your ideal customer, which can provide quick returns.

Some digital marketing methods, like social media and content creation (blogging), are budget-friendly ways to connect with customers. See more business cost-saving ideas. It's also quite easy to track the return on investment (ROI) and scale up profitable methods.

But while digital marketing methods are often cost effective, running entire campaigns can be expensive, especially in competitive industries.

Here's more practical advice on digital marketing for small businesses.

Required equipment and technology

Types of equipment

If the business needs specialised equipment, it'll probably cost more than easily accessible items.

For example, an accountancy firm needs computers, desks, and a printer or two. But a medical consultancy might need to buy specialised, bespoke equipment.

Smart technology

To lower your upfront costs, you might:

• invest in refurbished technology, or pre-owned devices returned to their original condition
• choose cloud-based software that scales with the business, for example by starting with a single-user licence and upgrading it as the company grows

Insurance and risk management

Insurance protects a business from risks and liabilities.

Types of business insurance

There are three main business insurance categories:

• Liability insurance: Covers customer claims related to accidents, injury, and property damage
• Workers' compensation: Supports employees injured on the job
• Property insurance: Covers damage to a business's physical assets, like buildings and machinery

Learn more about the types of business insurance.

Insurance requirements and costs can vary

Business insurance requirements and costs depend on things like:

• Industry: Businesses in high-risk industries like construction need more comprehensive liability and workers' compensation cover than a retail business
• Location: Businesses in urban areas with high foot traffic need more extensive liability insurance than those in rural areas
• Size of the business: Larger businesses with more staff, customers, and equipment need broader and more expensive protection

How to reduce start-up costs

Reducing start-up costs keeps your business financially stable and extends your runway to profitability. Focus on four key strategies to minimize your initial investment.

1. Build a budget

Start-ups often overspend in key areas, so keeping a clear budget helps you stay in control. Building a budget (and sticking to it) helps you manage and reduce start-up business costs. A budget breaks down your total expected costs to help you spend your money wisely and have a clear view of your cash flow.

Here's more about budgeting and forecasting.

2. Prioritise essential expenses

To reduce the risk of cash flow problems, focus on the essential expenses at first. That's anything the business needs to operate: industry licences, equipment, initial inventory, and so on.

You can think about buying non-essentials and luxuries later on, once your business is up and running.

3. Choose scalable tools

Software tools that are scalable let you start out with the low-cost basics and upgrade as you grow, which is a smart way to keep your day-one costs down while planning for the future.

Xero is cloud-based accounting software that grows with your business. For example, Xero Payroll automates your pay runs to make the process quick and efficient. And as your business grows, add a third-party payroll app to meet your expanding needs.

4. Outsource wisely

Outsourcing tasks to skilled freelance accountants and bookkeepers helps keep start-up expenses down.

Ensure you haven't missed any expenses by using the starting a business checklist. Avoid paying full-time salaries by hiring professionals when you need to, so you can focus on your business and leave things like compliance and organising financial records to the specialists.

Here's how a bookkeeper can help your business. And if you give your bookkeeper (or accountant) access to Xero, you can work with them on your financial data at the same time.

Stay on top of business costs with Xero

Managing start-up costs becomes simpler with cloud-based accounting software that grows with your business. Xero helps you stay financially organized from day one:

• Budget management: Set and track spending limits across different cost categories
• Real-time expense tracking: Monitor costs as they happen to avoid budget overruns
• Cash flow monitoring: See your financial position at a glance with intuitive dashboards
• Smart reporting: Generate insights that help you make informed business decisions

Try Xero for free to see how it can streamline your financial management from startup to growth.

FAQs on business start-up costs

Here are answers to common questions about calculating and managing the costs of starting a business.

How much does it cost to start a business in Australia?

Start-up costs in Australia typically range from $5,000 to $50,000, depending on your business type. Online businesses may start from $1,000, while retail stores often need $20,000 or more for inventory and fit-out costs.

Is $5,000 enough to start a business?

Yes, $5,000 can launch many service-based or online businesses. This budget covers basic legal setup, simple website development, initial marketing, and essential software subscriptions for the first few months.

Is $10,000 enough to start a business?

$10,000 provides a solid foundation for most small businesses. This amount typically covers business registration, professional website, initial marketing campaigns, basic equipment, and 3-6 months of operating expenses for service businesses.

What is the average start-up cost for a small business?

The average small business start-up cost ranges from $30,000 to $40,000. However, online businesses often start with under $5,000, while retail or manufacturing businesses may require $50,000 or more for inventory and equipment.