Record Insolvencies Surge Among Australian Companies

1

The surge, driven by a 40% increase in corporate insolvencies, has been attributed to a combination of persistent inflation, rising interest rates, and the Australian Taxation Office's (ATO) aggressive debt collection tactics.

"We're seeing a perfect storm of economic conditions that are driving businesses to the brink," remarked Michael Sloan, restructuring and insolvency partner at Ashurst. "The usual suspects of inflation, interest rates, and overall economic sentiment are key factors."

Small to medium enterprises (SMEs) are particularly vulnerable, facing a more stringent ATO, which is increasingly unwilling to continue supporting struggling businesses. Additionally, sectors like property development and health care are grappling with their own financial challenges.

Restructuring specialists are predicting a continued rise in insolvencies. "The current trend is likely to endure over the next 12 months," commented Kathy Sozou, a partner at McGrathNicol and vice-president of the Australian Restructuring Insolvency and Turnaround Association.

Jennifer Ball, partner at Clayton Utz, echoed these sentiments: "Unless we see a stabilization in inflation and a drop in interest rates, we're set for a busy year in insolvencies. A significant number of smaller businesses could fail through to the end of 2024 and into 2025."

In addition, ASIC's separate data indicates a striking rise in the appointment of restructuring experts. Over the same financial year, 1,424 companies enlisted these specialists, marking a 219% increase from the previous year. The trend has continued into the first weeks of FY 2024-25, with 36 companies already seeking their services, compared to just 36 in the corresponding period of the previous year.

Gareth Gammon, director of Insolvency Australia, described the figures as "astonishing yet expected," considering the current cost-of-living pressures, elevated interest rates, and the ATO's firm stance on debt collection. "The ATO is in overdrive to recover debts, especially from small businesses. Directors are dealing with ongoing economic challenges and a tough macroeconomic environment," Gammon stated.

Gammon also noted, "This situation is leading to a rise in court-initiated windings-up. Conversely, it is pushing more directors to take proactive actions to salvage their businesses."

From an economic viewpoint, these developments provide another indicator of Australia’s per capita recession. Although the overall economy might seem to be growing, boosted by immigration, individual households and businesses are struggling to keep pace.

As we look ahead, the need for strategic financial planning and responsive policy measures becomes clear, not just to help businesses survive, but to facilitate broader economic stability.

Published:Sunday, 11th Aug 2024
Source: Paige Estritori

Share this news item:

Finance News

Clear

ASIC Releases Updated Legislation for Financial Advice

16 Sep 2025: Paige Estritori

The Australian Securities and Investments Commission (ASIC) has introduced a new, consolidated legislative instrument that relates to financial advice. This update follows through on ASIC's May announcement regarding the remake of three existing advice-related instruments. - read more

Commonwealth Bank Challenges RBA's Card Fee Reform

12 Sep 2025: Paige Estritori

Australia’s leading financial institution, the Commonwealth Bank of Australia, has openly criticised the Reserve Bank of Australia (RBA) for its calculations related to a proposed reduction in debit and credit card transaction fees. The RBA suggested that the reform would save Australian businesses $1.2 billion annually and benefit the majority of companies, a claim that the Commonwealth Bank strongly disputes. - read more

Ongoing Consumer Spending Surge Threatens Future Interest Rate Cuts

11 Sep 2025: Paige Estritori

Amid a period of robust consumer spending, Australia's mortgage holders may face limited future interest-rate cuts. The Commonwealth Bank has observed Australians increasing their spending over the last six months, spurred by rising incomes, a robust job market, and previously lowered interest rates. - read more

CSLR Funding Concerns as Special Levy Decision Remains Pending

11 Sep 2025: Paige Estritori

The Compensation Scheme of Last Resort (CSLR) recently highlighted potential delays in compensation payments due to insufficient special levy funds. In July, the CSLR's proposed FY2025–26 levy plan allocated $67.29 million for financial advisers, surpassing the $20 million limit set for the subsector. This shortfall of $47.29 million prompted the Treasury to initiate a consultation in August to determine funding solutions for the excess levy. - read more

Retiree Surge to Drive Demand for Financial Advisers in Australia

10 Sep 2025: Paige Estritori

A recent study by Adviser Ratings, as outlined in the 2025 Australian Financial Advice Landscape Report, indicates that the number of financial advisers in Australia will need to increase significantly. From the present count of 15,500 advisers, the industry is expected to require more than 50,000 over the next thirty years to cater to a growing retiree population. - read more

Click for more Finance News