The federal government plans to slash key apprenticeship support payments by half in 2026, in a move critics say will make it harder for small businesses to take on junior chefs, mechanics, and other in-demand workers.
Minister for Skills and Training Andrew Giles on Monday announced an extension of the Key Apprenticeship Program, which supports trainees and employers in the housing and green energy sectors.
Until December 2026, full-time apprentices in eligible fields will continue to receive up to $10,000 in financial support, with their employers eligible for $5,000.
But Giles also confirmed major changes to the Australian Apprentice Training Support Payment (AATSP), which benefits apprentices in priority occupations outside of the housing construction and green energy fields.
The AATSP currently offers those apprentices up to $5,000, helping them manage the cost of living and incentivising them to finish their training.
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Separately, the Priority Hiring Incentive currently grants employers up to $5,000, supporting them while bringing inexperienced workers up to speed.
Under those government reforms, both the AATSP and Priority Hiring Incentive will be halved to $2,500 from January 1 next year.
Incentive payments for apprenticeships commenced before January 1, 2026, won’t be affected.
Automotive repair, hospitality sector concerns
Michael Wentworth, managing director of Sydney group training organisation Apprenticeships Are Us, said the funding reform would challenge SMEs hoping to take on apprentices.
“That’s devastating to a lot of small businesses,” Wentworth told SmartCompany on Wednesday.
“It’s short-sighted. It’s unnecessary. I just can’t imagine why they would do that.”
The funding reform could rattle the automotive repair sector, where Apprenticeships Are Us does the bulk of its work, he said.
“I’ve got over 250 workshops, 80% of them are [in] the SME sector, and a lot of them are reconsidering and saying, ‘Well, without the support, why am I going to make the investment of putting on a first-year apprentice when it’s low productivity?’”
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Alternatives include taking on skilled labour from abroad, or pushing out service timeframes to manage a smaller workforce.
“We’ve got a major issue with trying to find skilled labor in this country, yet we cut the funding for apprentices,” said Wentworth.
“It just doesn’t seem to make any sense.”
The announcement’s timing — just before the peak apprentice hiring season — is especially frustrating, he added.
Wes Lambert, CEO of the Australian Restaurant & Cafe Association, said the decision would also affect hospitality businesses.
It marks a “serious blow to Australia’s already fragile hospitality workforce pipeline,” he wrote on social media.
“At a time when restaurants, cafés and pubs are battling chronic skills shortages, rising wage pressures, and declining training enrolments, removing support for apprentices doesn’t just hurt young people entering the industry — it puts the entire sector at risk.”
“Hard decision” to support housing and energy jobs
Giles said the “hard decision” was part of the government’s economic management plan, and came after an extensive review of apprenticeship support settings.
“I’m confident today that we have made the right decision, recognising that it is a hard decision,” he told reporters on Monday.
“We’ve struck the right balance as we look ahead to further apprenticeship reform in the coming year.”
While industry advocates argue all occupations listed on the apprenticeship priority list are worthy of full support, the federal government maintains Australia has pressing needs in housing and green energy development.
The KAP extension is “so important to keep up the numbers of more apprentices entering these two critical sectors, building more homes for Australia and taking up all of the opportunities of the net zero renewable future,” said Giles.
