Why so many Australian companies are going bankrupt: dire warning from comparison site Insolvency Australia
Cash-strapped companies are caving under pressure from the Australian Taxation Office and other creditors as the insolvency trickle turns into a “surge”.
That’s the verdict of comparison site Insolvency Australia, which found that the number of companies failing has risen significantly in the past year.
Companies appointing administrators, liquidators and insolvency firms rose 57 per cent nationally in the latest quarter, compared to the same period in 2021/22.
NSW had the most companies falling into financial trouble in the last quarter, with almost 1,170 corporate insolvencies.
Tasmania recorded the largest year-on-year percentage increase in insolvencies, at 133 percent.
The ACT had a 64% increase in corporate insolvencies compared to 2021/22, while NSW and Queensland had a 59% increase.
Cash-strapped companies are caving under pressure from the Australian Taxation Office and other creditors as insolvency trickle turns into ‘surge’
More companies in other states have also gone bankrupt, with corporate insolvencies rising by 54 percent in Victoria, 52 percent in South Australia and 50 percent in Western Australia.
Insolvencies in the Northern Territory remained stable.
“Over the last year there has been a lot of discussion in the industry about the next wave of insolvencies,” said Australian Insolvency Director Gareth Gammon.
‘It started as a trickle and has now become more of a surge as economic pressures and ATO debt collection activities combine to create the perfect storm.
“Beyond this last quarter, we are now seeing an increase in judicial liquidations by the big four banks, which means that the next few months could be just as challenging.”
The tax office and other creditors posed the biggest threat to cash-strapped Australian companies, Insolvency Australia said.
Chris Baskerville, a partner at insolvency firm Jirsch Sutherland, expected insolvencies to continue to rise through the remainder of 2023.
NSW had the most companies in financial trouble in the last quarter, with almost 1,170 corporate insolvencies.
He attributed the rise in insolvency appointments to the tax office stepping up its enforcement action against companies.
“Their foreclosure on outstanding debts is reaching, if not exceeding, pre-pandemic levels,” Baskerville said.
‘The ATO seems to be less open to payment arrangements, especially those proposing more than two years.’
BCR Advisory founder John Morgan said insolvency appointments would continue to rise as companies grapple with rising interest rates and collection pressure from the tax office.
Insolvency Australia data showing a rise in insolvencies was released as part of its latest Corporate Insolvency Index.