SME capital investment plans for FY2026: survey of 200 businesses

SMB Loan asked respondents which capital categories they would invest in FY2026, presenting them with a list of 17 different asset categories, spanning tangible assets (like machinery and vehicles), intangible investments (such as intellectual property), and structural works.

Almost three quarters (71%) will make at least one capital investment FY2026.

The most common investment will be technology and IT hardware (38% of respondents), an area essential to the efficient running of most businesses.

The next most common area of investment will be office furniture and fittings (28%), pointing to a continuing return of the workforce to the office.

In contrast, only 19% plan to invest in buildings and structural improvements, and just 6% in broader capital works like car parks or large structural additions.

Spending on machinery and equipment (by 22% of businesses) and motor vehicles (13%) appear relatively restrained, which may indicate a wait and see attitude toward large ticket items that require more financing or longer term certainty. Environmental and sustainable assets (11%) show steady interest, as energy efficiency or compliance upgrades are becoming more important.

The technology and machinery responses describe purchase priorities and possible delays, not the dollars eventually spent. The accompanying ABS data cover a different population. These remain plans from the report labelled July 2025, even though FY2026 has ended.

Interestingly, only 9% of businesses will invest in internally developed software or digital platforms likely preferring to use subscription based software. The 8 per cent investment each in R&D, safety/compliance, and intangibles like intellectual property. This suggests that while some businesses are innovating, the majority will invest in the more immediate needs of their businesses.

SMB Loan examined capital expenditure plans across micro, small, medium sized and large businesses (measured by employee head count).

Micro businesses are cautious, with only 53% planning any capital investments, compared with 75 to 85% of larger businesses.

Across all sizes, technology and IT hardware remains the dominant investment priority. It tops the list for large businesses (60%) and is high among small and medium sized businesses (45% and 38% respectively). Even 27% of micro businesses, despite being more cautious overall, plan to invest in IT hardware, suggesting overall business reliance on technology to maintain efficiencies.

Office furniture and fittings also show strong interest across small (32%), medium sized (33%) and large businesses (30%).

The larger the business, the more likely it is to invest in machinery and equipment FY2026, with 18% of micro and 20% of small businesses planning to invest, rising to 28% of medium sized businesses and 30% of large businesses.

Meanwhile, investment in buildings and structural improvements are increasingly more common as a businesses, and their footprints, grow, rising from just 8% of micro businesses to around a quarter of all other business sizes.

Interestingly, large businesses are not necessarily investing hard across all categories. For example, similar proportions as smaller businesses plan to invest in R&D, intangible assets and internally developed software.

Overall, the data shows that small and medium sized businesses are as confident, and more so in some areas, as large businesses when it comes to capital spending, while only a very small proportion

When comparing capital investment intentions for FY 26 across the five major states, South Australian (SA) businesses emerge as the most confident, with 80% planning to invest in at least one capital asset.

This is followed by businesses in Western Australia (74%), Victoria (73%), NSW (70%), and Queensland (66%).

Technology and IT hardware is the most consistently strong investment category across all five states. SA leads, at 53%, followed by NSW (46%) and Victoria (35%).

Office furniture and fittings follow, particularly in SA (40%), NSW (31%), and WA (26%), likely pointing to ongoing business efforts to bring employees back into workplaces.

Meanwhile, buildings and structural improvements will be most common in SA (27%) and WA (21%), suggesting stronger intent to expand or renovate physical premises in these states. SA businesses, too, are more likely to invest in machinery and equipment (at 33%) than businesses in other states (at 16 to 24%).

Smaller asset categories also show some interesting State level variation. For example, motor vehicle investments are notably high in QLD (22%) and WA (21%), but much lower in SA (7%) and NSW (10%). Land improvements, a typically low ranking category, spike to 20% in SA, but are negligible elsewhere. Similarly, leasehold improvements are far more common in WA (21%) than in VIC (7%).

Taking a cautious or survivalist approach, 17% of respondents say they are in cost reduction mode and would not be making capital investments FY2026.

The results vary sharply by business size. A significant 36% of micro businesses report they are not planning capital spending, more than 10 times the proportion of small businesses (3%), and still much larger than medium sized (6%) and large businesses (10%).

Across the States, QLD has the highest share (22%) of businesses in cost reduction mode, followed by VIC (18%) and NSW (16%). Overall, WA and SA businesses appear more confident, while eastern states are more cautious.

SMB Loan sought to identify internal roadblocks, distinct from external market forces, that prevent businesses from committing to capital upgrades. As part of the survey, it asked respondents to choose from a list of seven internal factors that impact their capital investment decision making. The options comprised operational and financial challenges such as profit constraints, growth plans, cash flow pressures and staffing limitations.

A striking 90% of businesses cite at least one internal factor as a reason for delaying capital investment, even before external pressures are taken into account.

The most common reason is tighter profit margins, selected by 43% of businesses. Similarly, insufficient cash flow (26% of businesses) and prioritising debt repayments or loan servicing (17%) indicate that when businesses are working within narrow financial constraints, it would limit the ability of many to fund major capital.

Lack of immediate growth plans was also cited by one in five businesses (20%). Meanwhile, staffing shortages or hiring freezes would hold back 22% of businesses, while internal operational inefficiencies would hold back 14% from investing in capital, indicating a shortage of people or systems would not be able to support those investments.

The survey outcomes reveal that financial pressures would most impact business decision- making around capital, but the specific nature of those pressures, cash flow, staffing, debt or inefficiencies, would vary significantly by business size.

At 80%, large businesses are most impacted by internal pressures, and also by time and resource constraints.

Across all business sizes, however, tight profit margins remain the leading internal barrier to capital investment.

Across the five major States, tighter profit margins are the most common internal factor that would hold businesses back from capital investment, particularly in SA (53%), but also WA (47%) and NSW (47%).

SA also stands out for the highest share of businesses that would not invest in capital if they had no immediate plans for expansion (53%).

Other internal influences vary significantly between states. QLD businesses are most impacted by internal inefficiencies (25%) and cash flow constraints (34%), while WA businesses would be heavily impacted by staffing shortages (42%), far more than in SA (7%) or NSW (16%).

South Australia recorded the highest reported debt-repayment concern (40%), compared with 23% in Victoria. Subgroup respondent counts are unavailable; this is a description of the archived percentages, not a statistically tested state comparison.

SMB Loan also sought to identify the macro level or environmental forces that would deter businesses from investing in capital assets in FY 26. As part of the survey, it asked businesses which external factors influence their decision to lower their investment in capital from a list of 17 that includes economic conditions, cost inputs, interest rates, market demand, competition and regulatory uncertainty.

While internal constraints remain the more common reasons businesses would hold back on capital spending, external pressures are also weighing heavily, with 76% of businesses citing at least one external factor that would influence their decision.

The most commonly cited barrier is high energy costs (30%), which continues to impact operating budgets, especially in industries with significant power needs such as manufacturing and logistics. This is followed by rising interest rates (24%), which directly affects the cost of borrowing for capital.

Other key influences include economic uncertainty (22%), supply chain delays or costs (20%), and rising equipment and material costs (21%), all of which are real issues in the current economic environment where input costs and planning risks remain high.

Across all business sizes, external pressures are a significant deterrent to capital investment, with between 73% and 80% of businesses citing at least one factor.

High energy costs is the most widely cited influence for small (35%) and medium sized (31%) businesses.

Rising interest rates would most influence investment decisions for small businesses (34%). Energy costs (29%) and economic uncertainty (21%) would most influence micro businesses, while large businesses are least affected by energy prices (15%) and interest rates (10%), but most impacted about overall economic uncertainty (at 30%).

One in five (20%) of large businesses are also affected by declining industry demand, compared with just 10 to 16% across other sizes.

Between 73% and 84% of businesses in each major State reported at least one external factor that would cause them to pull back on capital spending in FY 26.

The most affected are in WA (84%) and SA (80%), followed by NSW (79%), QLD (75%), and VIC (73%).

SA businesses report the highest rates across multiple barriers, including high energy costs (40%), interest rates (27%), rising material costs (27%), market related customer loss (27%), and competitive pressure (27%).

Meanwhile, WA businesses are most affected by rising equipment and material costs (37%) and supply chain issues (26%), though notably less concerned about competition (5%) or energy costs (16%).

VIC’s external pressures are more evenly spread, with top concerns being high energy costs (33%), interest rates (23%), and economic uncertainty (22%). In QLD, high energy costs (31%) and material costs (28%) lead the influences, while NSW reports more moderate concern across a range of issues, including energy (27%), interest rates (23%), supply chain delays (23%), and economic uncertainty (20%).