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Aussie boss takes pay cut to 'survive' as wave of businesses face collapse in face of ATO 'killer'

Adam Thomson is calling on the government to abolish GST payments on coffee as that would be a huge help to the industry.

Stewart Perrie
·Senior Journalist
·4-min read
Cafe owner Adam and his wife Rejoice next to commercial Sydney spot that's up for lease
Cafe owner Adam and his wife Rejoice said they have been working overtime at their Brisbane cafe to keep the lights on as the hospitality industry faces a dire outlook. (Source: Supplied/Getty)

An Australian cafe owner has revealed how brutal the cost of living is impacting his business and the desperate lengths he's going to keep it from closing down. Adam Thomson has been running Dovetail on Overend in Brisbane for more than a decade and he said the last few months have easily been the hardest.

The cafe owner told Yahoo Finance it's taking a "very heavy toll" on him and his wife and he's calling on the government to help end what he calls the "cafe killer". Thomson said it's so hard to keep going when there's no light at the end of the tunnel.

"I work six days a week here, and the main thing we've had to do is try to cut costs wherever we can. So the quickest way to do that is just to be really, really careful with your wages," he said.

"So we're actually having fewer people work here than we would like, and we're having to do more work ourselves to make up the numbers physically doing a lot more work than we would ideally like to be.

"We pay ourselves less than the award wage to be here because, at the end of the day, it's just been a matter of matter of survival. The last year has been just survival mode."

Thomson said he's been working more than 60 hours a week just to keep the lights on.

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Thomson wants to see the government step in and help small businesses like his.

He said if the cafe makes around $10,000 a week, between a quarter and a third of that is from coffee alone. But Thomson said paying GST on every cup was a "cafe killer" and costs him hundreds of dollars each week.

"We've had to enter into a payment plan with the ATO [Australian Taxation Office] just to cover our GST obligations," he told Yahoo Finance.

"In this industry, nearly everything we buy is GST-free, so we can't actually claim anything, but everything we make, we sell with GST.

"So if you take our gross turnover, we have to turn over almost 10 per cent every quarter to the ATO before we even pay any other bills."

He said if the government abolished GST payments just on coffee, it would give so much reprieve for many cafes across the country.

The cafe owner knows Aussies are pinching their wallets more during the cost of living crisis, but he believes many don't know how close their favourite cafe, restaurant or pub is to closing down forever.

Accounting software company Xero noted in its quarterly report that while sales for Aussie small businesses were up in April (12.3 per cent) and May (2.5 per cent), they dropped in June by 3.5 per cent.

CreditorWatch also revealed recently that the failure rate for the hospitality industry is set to jump from 7.5 per cent to 9.1 per cent in the next year, with predictions that one in every 11 Aussies hospitality venues will go under. The average failure forecast across all industries is 5.1 per cent.

"The combination of declining order values and increasing payment defaults is a major concern as it indicates more businesses are experiencing both cost and demand pressures," CreditorWatch CEO Patrick Coghlan said in a statement.

"With another rate increase becoming increasingly likely, we expect both metrics to deteriorate even further."

Thomson told Yahoo Finance that one in 11 forecast was "optimistic".

"I think it's going to be worse than that, because being here, experiencing it myself, it's just really disheartening, because you're working harder than ever, and you don't make enough to pay the bills, and inevitably, small business owners just say, 'I just can't do it anymore'," he said.

In another blow for the industry, the Australian Securities & Investments Commission has revealed that hospitality businesses failed at the fastest rate on record for the 2023-24 financial year. Insolvencies in the industry rose faster than any other sector to a record 1,667.

The previous high was set last year with 1,114 insolvencies.

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