Insolvencies in Australia are on the Rise
Current Insolvency Trends in Australia
Recent data from the Australian Securities & Investments Commission (ASIC) shows a marked increase in companies entering external administration during the 2025 financial year compared to previous years.
A surge in court-appointed liquidations highlights the growing economic strain faced by Australian businesses. With rising debt defaults and a stronger enforcement stance—particularly from the Australian Taxation Office (ATO)—creditors are showing less tolerance for prolonged financial distress and are increasingly pursuing legal action over voluntary resolutions.
Below, we explore the most common causes of corporate insolvency in Australia.
1. Poor Cash Flow Management
While a business may appear profitable on paper, poor control over cash inflows and outflows can quickly bring operations to a halt. Cash flow is the lifeblood of any business, and without consistent access to working capital, even strong revenue can’t offset short-term obligations.
2. High Overheads
Escalating rent, wages, and operating costs—especially when coupled with falling revenue—can create an unsustainable financial model. Recent inflationary pressures and legislative changes to wages have further increased the cost of doing business across many industries.
3. Inadequate Strategic Management
A lack of experience at the management level remains a key driver of insolvency. Inexperienced directors may pursue high-risk trading without a solid grasp of budgeting, forecasting, or proper financial record-keeping, leaving the business vulnerable.
4. Excessive Borrowing or Overtrading
Taking on more debt than a business can sustain, or growing too quickly without the necessary capital to support expansion, often leads to insolvency. These issues are magnified when market conditions shift or unexpected costs arise.
5. Economic Conditions
Rising interest rates, inflation, and supply chain disruptions continue to impact business performance. Certain industries—such as construction—have faced particular hardship in the post-COVID economy, with many unable to recover from cumulative economic shocks.
6. Failure to Meet Tax Obligations
Falling behind on BAS, PAYG, or superannuation liabilities is a major red flag. The ATO remains one of the most active petitioning creditors in Australia, and its renewed focus on enforcement has significantly contributed to the rise in insolvency appointments.
The Takeaway
Recognising the warning signs and seeking professional advice early can be the difference between recovery and collapse. If your business is facing mounting financial pressure, don’t wait—speak to an insolvency expert today by calling +61 2 9251 5222.