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Author: Admin | 2025-04-28
The number of corporate insolvencies has spiked to a monthly high since 2015 as more companies file for voluntary administration. Latest data from ASIC shows that 967 companies filed for insolvency in February 2024, recording a 40% jump in insolvency cases since February 2023. This is the highest number of insolvencies since October 2015, as economic pressures continue to challenge Australian businesses. The spike in insolvency aligns with Insolvency Australia’s Corporate Insolvency Index, released at the end of last year. According to its report, administrator and controller appointments increased by 24% to 4531 in the second half of 2023. A quarter of these appointments were wound up by a court order, 113% higher than the same period in 2022. Business-related personal insolvencies are also on the rise, as wound-up company directors face the risk of paying off company debts. Reports from the Australian Financial Security Authority claim that business-related personal insolvencies accounted for 27.3 per cent of all new personal insolvencies in the December quarter of 2023. Insolvency forecast in the year ahead According to CreditorWatch, business insolvencies are expected to rise in the upcoming months, citing that businesses operating at a loss will not be able to sustain another six to nine months of high–interest environment, aggressive debt-chasing, and low customer confidence. CreditorWatch also sees record-high increases in payment defaults from business-to-business transactions (+49% YoY increase in February). This indicates a concerning trend that many businesses are facing depleting cash reserves and tightening margins. According to CreditorWatch, the regions that pose the highest risk of business failure are around Western Sydney and South-East Queensland, with Merrylands-Guildford (NSW) and Canterbury (NSW) as the top-ranked region. Debt-chasing a major concern Small businesses account for most of the insolvency cases in Australia. Many self-employed businesses or those with small revenue margins must grapple with a limp economy and aggressive debt chasing by the ATO and banks. Recently, the ATO announced that it would take stronger action against businesses that don’t fulfil their tax obligations. According to ATO’s second commissioner, Jeremy Hirschhorn, small businesses account for over two-thirds of the ATO’s collectable debt, which is currently at around $50 billion. “During the pandemic, we took a different audit posture with individuals and small businesses, chased fewer lodgements and recovered less debt,” Hirschhorn said. While we resumed stronger action in late 2021, we have observed a behavioural shift as to the priority of paying
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