14,000 Business Failures and Counting: What the Insolvency Surge Actually Tells Us

In May 2024, Australia recorded its highest monthly insolvency figure since ASIC began publishing data in 1999. By the end of FY2023-24, more than 11,000 companies had entered external administration — a 39% increase on the prior year. Current projections suggest FY2024-25 will exceed 14,000.

These aren’t abstract statistics. They represent businesses that employed people, served customers, and — in most cases — operated for years before failing.

The question worth asking isn’t whether the numbers are alarming. It’s what they actually reveal about how businesses fail.

The profile of failure

ASIC’s data paints a consistent picture of what business failure looks like in Australia. According to reports lodged by external administrators for FY2022-23, 83% of insolvent companies owned assets of $100,000 or less. 82% employed fewer than 20 staff. 68% owed liabilities under $1 million.

These are small businesses. And they’re not failing because of exotic financial engineering or market disruption. The most commonly reported causes of failure were inadequate cash flow or high cash use (52%), trading losses (49%), and pandemic-related impacts (19%).

Construction leads the count, representing 27% of all external administrations in FY2023-24. Accommodation and food services follows at 15%. The September 2024 quarter saw hospitality insolvencies double year-on-year — a 105% increase.

What changed

Three forces converged in 2023-24 that explain much of the surge.

First, the ATO resumed enforcement. During the pandemic, the Tax Office paused debt recovery actions. That leniency ended. By January 2024, collectible tax debts had exceeded $50 billion, with small businesses accounting for roughly two-thirds — over $35 billion. The ATO has since ramped up wind-up applications, director penalty notices, and garnishee orders. In FY2024-25, the ATO issued 84,529 director penalty notices covering $5.5 billion in liabilities.

Second, pandemic support created artificial survival. Government cash transfers and cheap credit helped businesses accumulate buffers through 2020-21. But the RBA’s Financial Stability Review notes that many firms with underlying issues — poor management, weak financial controls — stayed afloat longer than they otherwise would have. The age distribution of firms entering insolvency has shifted, with more older businesses failing in 2023 and 2024 than usual.

Third, operating conditions tightened. Construction costs rose 40% since the pandemic. Energy prices remain elevated. Interest rates increased by over 400 basis points between April 2022 and late 2024. Hospitality operators, already running thin margins, faced discretionary spending pullbacks as consumers tightened budgets.

The pattern underneath the numbers

What the insolvency data reveals isn’t sudden collapse. It’s gradual deterioration that goes unaddressed until external pressure — a tax bill, a lost contract, a rate rise — tips the balance.

The businesses failing now didn’t become insolvent overnight. Many operated for years with structural problems: inadequate margins, poor cash visibility, over-reliance on key customers, or deferred tax obligations treated as unofficial working capital.

The pandemic didn’t cause these problems. It masked them. And now the mask has come off.

What this means for business owners

The insolvency surge isn’t primarily a story about economic conditions. It’s a story about financial visibility.

The businesses that survive challenging conditions aren’t necessarily the ones with the best products or the hardest-working owners. They’re the ones that can see problems early enough to act. That means knowing — actually knowing — where cash is going, which activities generate margin, and what obligations are coming due.

The ATO isn’t going away. Operating costs aren’t returning to 2019 levels. The question is whether you can see your numbers clearly enough to navigate what’s ahead.

Sources

ASIC Insolvency Statistics; RBA Financial Stability Review April 2025; ATO Annual Report 2024-25; CreditorWatch Business Risk Index.