An Australian cafe owner has revealed how brutal the cost of living is affecting his business and the desperate lengths he will go to stop it from closing. Adam Thomson has run the Dovetail in Brisbane’s Overend for more than a decade and he said the last few months have easily been the toughest.
The cafe owner told him Yahoo Finance is taking a “very heavy turn” for him and his wife, and he’s calling on the government to help end what he calls the “café 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 fastest way to do that is just to be really careful with your wages,” he said. .
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“So we’re actually having fewer people working here than we’d like, and we’re having to do more work ourselves to make up the numbers by physically doing a lot more work than we’d ideally like to be.
“We pay ourselves less than salary to be here because, at the end of the day, it’s just been a matter of survival. The last year has just been survival mode.”
Thomson said he has been working more than 60 hours a week just to keep the lights on.
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‘Café killer’: Govt urged to scrap GST on one item
Thomson wants to see the government step in and help small businesses like his.
He said if the cafe makes about $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 costing him hundreds of dollars every week.
“We had to enter into a payment plan with ATO [Australian Taxation Office] just to cover our GST liabilities,” he said Yahoo Finance.
“In this industry, almost everything we buy is GST-free, so we can’t really claim anything, but everything we make, we sell with GST.
“So if you take our gross turnover, we have to hand over almost 10 per cent every quarter to the ATO before we pay any other bills.”
He said that if the government removed GST payments only on coffee, it would give so much respite to many coffee shops across the country.
Australian businesses are on the brink of collapse
The cafe owner knows Aussies are tightening their wallets more during the cost of living crisis, but he believes many don’t know how close their favorite cafe, restaurant or pub is to closing for good.
Accounting software company Xero noted in its quarterly report that while sales to Australian small businesses rose in April (12.3 per cent) and May (2.5 per cent), they fell in June by 3.5 per cent.
CreditorWatch also recently revealed that the default rate for the hospitality industry is set to rise from 7.5 per cent to 9.1 per cent next year, with forecasts that one in 11 Australian hospitality properties will go under. The average failure prediction across all industries is 5.1 percent.
“The combination of falling order values and rising defaults is a major concern as it shows more businesses are experiencing cost and demand pressures,” CreditorWatch CEO Patrick Coghlan said in a statement.
“With another rate hike increasingly likely, we expect both indicators to deteriorate further.”
Thomson said Yahoo Finance that one in 11 forecasts was “optimistic”.
“I think it’s going to be worse than that, because to be here, to experience it yourself, it’s just depressing because you’re working harder than ever and not making enough to pay the bills, and inevitably, small business .owners just say, “I just can’t do it anymore,” he said.
In another blow to the industry, the Australian Securities and Investments Commission has revealed that hospitality businesses failed at the fastest rate on record for the 2023-24 financial year. Insolvencies in manufacturing rose faster than any other sector to a record 1,667.
The previous level was set last year with 1,114 bankruptcies.
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