New research has revealed a critical AI paradox for Australian small businesses: while regular AI users are more likely to see revenue growth, surprisingly, more than half (54%) say their business wouldn’t be impacted if AI tools disappeared tomorrow.

Xero’s ‘AI for small business: Bridging the gap from inertia to action’ white paper, which surveyed 1,100 small businesses globally including 500 in Australia, found those that have adopted AI are seeing improved business performance, with 57% of Australian small businesses that grew revenue in the past year saying they use AI tools at least weekly.

However, the findings show a market that is curious but not yet reliant. While 56% of Australian owners feel confident about using AI, this confidence has not yet translated into deep, business-critical adoption, creating a significant AI readiness gap. 

Angad Soin, Managing Director ANZ and Global Chief Strategy Officer at Xero, said the readiness gap is preventing many small businesses from realising the benefits of AI.

“AI-savvy small businesses are seeing improved revenue growth but Aussie entrepreneurs are still hesitant to fully embrace the technology,” Soin said. “There is a difference between surface-level confidence and the deep trust needed for critical adoption. While Australian owners are optimistic, they’re also telling us they have concerns around security and reliability, which is creating a readiness gap. ”

The report found this gap is driven by significant external and internal barriers. “Data privacy and security” was cited as the top concern for Australian small businesses (42%), followed by the “accuracy and reliability” of AI outputs (35%).

Australian small businesses are also uniquely time-poor compared to their global peers. Nearly a quarter (23%) cited a key barrier to AI adoption being a lack of  time to research and teach themselves how to use the technology—more than double the rate of small businesses in the UK (11%) and US (8%).

Soin said: “The main challenge for Australian small businesses isn’t just adopting technology, it’s finding time. Our research shows small businesses are optimistic about the impact AI can have within their business, but a gap in trust and, most acutely, a lack of time is holding them back from moving AI from a ‘nice-to-have’ to a critical part of their business.”

“This creates a risk of a two-speed economy where businesses with the resources to adopt AI will accelerate while the others are left behind. The solution isn’t about adopting every new tool overnight. For time-poor businesses, the easiest way to start is by building new habits and exploring AI within the platforms they already use every day. It’s about starting small, testing, and strategically auditing where time is being lost to ‘busywork’ to ultimately give them back their most valuable asset: time.”

The report also highlights a ‘trust leap’ in adoption. While current AI use is highest in creative tasks like marketing (25% weekly use), small businesses show intent to move AI into the core of their operations. In the next six months, 31% plan to use AI for bookkeeping and accounting.

Soin said: “The role of accountants and bookkeepers is evolving as small businesses look to move AI from the edge of their business into their core operations. Becoming the strategic partner who can help them navigate this change and safely integrate AI into their financials will be a critical role.”

The  AI for small business: Bridging the gap from inertia to action’ white paper outlines a three-pillar approach for small businesses to bridge the gap, focusing on adopting a new mindset, taking strategic action and de-risking the environment through trusted partners.