Activity-Based Budgeting (ABB) in Australia: 2025 Guide

Traditional budgeting methods are facing a shake-up in 2025, as more Australians turn to Activity-Based Budgeting (ABB) to gain sharper financial insights and respond to economic change. Whether you’re running a business or just want a smarter way to manage household finances, ABB is fast becoming the go-to strategy for those wanting more control and clarity.

What Is Activity-Based Budgeting? Why Is It Trending in 2025?

Activity-Based Budgeting is a method that builds budgets based on the specific activities required to deliver products or services, rather than relying solely on historical spending patterns. Unlike traditional budgeting—which often just tweaks last year’s numbers—ABB digs deep into the real drivers of costs and resource use. In 2025, with inflationary pressures, tighter margins, and new government reporting standards, businesses and households alike are looking for budgets that are not just accurate, but adaptive and transparent.

• Business Example: A manufacturing firm using ABB might break down the cost of producing each product line by mapping every activity involved, from procurement to packaging. This lets managers spot inefficiencies, justify expenses, and trim fat where it really matters.

• Personal Example: Households can use ABB by categorising expenses by activities—such as commuting, meal preparation, or leisure—helping families see exactly where their money goes and where they can cut back.

How ABB Works: Step-by-Step

Adopting ABB isn’t just for big corporates—2025’s cloud-based budgeting apps and tools make it accessible for SMEs and even households. Here’s how the process typically unfolds:

• Identify Key Activities: List all the activities that drive your operations or daily life. For a café, this could be ordering ingredients, prepping food, serving customers, and cleaning.

• Assign Costs: Calculate the resources (money, time, staff) required for each activity. Modern accounting platforms can automate this step, using data from receipts, payroll, or time-tracking tools.

• Forecast Demand: Estimate how often each activity will occur in the budget period, taking into account seasonality or growth plans.

• Build the Budget: Multiply the cost per activity by the forecasted frequency, then sum up to create your total budget. The result: a budget that flexes with your real-world operations, not just last year’s habits.

Many Australian businesses in 2025 are integrating ABB into their existing ERP and cloud accounting systems, taking advantage of AI-powered forecasting and automated reporting to keep budgets up-to-date and relevant.

2025 Policy Shifts and ABB’s Growing Importance

This year, several new financial policies and reporting requirements are accelerating the adoption of ABB across Australia:

• Government Procurement: From July 2025, federal contracts over $5 million must submit activity-based cost breakdowns to improve transparency and value-for-money assessments.

• ESG Reporting: New sustainability regulations require companies to disclose the environmental impact of specific business activities. ABB’s granular approach makes compliance easier and more accurate.

• SME Support: The ATO’s 2025 digital grants scheme now subsidises ABB software subscriptions for eligible small businesses, making it easier to access advanced budgeting tools.

With these changes, ABB is moving from a niche tool to a mainstream budgeting standard—especially for any organisation aiming to win government work or meet ESG obligations.

Real-World Results: How ABB Transforms Financial Decision-Making

The impact of ABB goes beyond just crunching numbers. Here’s what Australians are seeing in 2025:

• Clearer Accountability: By linking costs directly to activities, teams and households can see exactly who spends what—and why.

• Faster Response to Change: ABB makes it easier to adjust budgets in real time as economic conditions shift, whether it’s a new supplier, a change in demand, or a household expense spike.

• Data-Driven Savings: Businesses and families using ABB report savings of 5–15% compared to traditional budgeting, thanks to the ability to identify and eliminate unnecessary activities or overspending.

For example, a Sydney-based retailer switched to ABB in late 2024 and discovered that 20% of their logistics costs came from underutilised delivery runs. By consolidating shipments and adjusting routes, they cut costs by $80,000 in a year—without sacrificing service quality.

Should You Switch to ABB in 2025?

If you want a budget that reflects real-world activity, helps you stay agile, and meets the latest policy standards, ABB is well worth considering. It’s particularly powerful for growing businesses, project-based organisations, and households facing complex spending patterns.

ABB does require some initial effort to set up and maintain, but the clarity and control it delivers can pay off handsomely—especially as Australia’s financial landscape gets more demanding and digital-first.