Insolvency Australia

Small Business Restructuring transforming insolvency and business landscape, latest Corporate Insolvency Australia Index reveals

The Small Business Restructuring (SBR) scheme is reshaping Australia’s business recovery landscape, with the latest Corporate Insolvency Index from Insolvency Australia showing a three-fold increase in SBRs in the first half of the 2025 financial year. And the report’s author, Gareth Gammon, says small business restructuring will continue to gain momentum as more and more directors seek early intervention to preserve businesses and jobs.

“Collaboration and restructuring are now being prioritised over ‘traditional’ liquidation,” says Gammon, Director of Insolvency Australia. “This change in mindset has positioned liquidators as pivotal advisers for distressed businesses – and it will have positive implications for long-term economic stability.”

Jarvis Archer, an Insolvency Australia member and founder of Business Reset (named the Top Liquidator by Appointment Volume – Nationwide in the just-released H1 FY25 Corporate Insolvency Index) says: “It’s hard to understate just how transformative SBRs can be for small business owners. They change lives – and that’s a good thing for them, everyone who deals with their business, and for the economy generally. A business trading to the bitter end, or shutting down, causes losses and doesn’t result in creditor returns. Despite its critics that say SBRs are just delaying inevitable failure, we’ve seen strong success, with less than 5% of over 200 SBR proposals accepted by creditors being terminated before completion.”

Adds fellow Insolvency Australia member Scott Andersen, Principal of Worrells in Geelong, VIC, “The uptake of the SBR scheme is a standout, demonstrating that businesses are becoming more proactive in seeking assistance before reaching crisis point.”

It’s a view also echoed by Amanda Bull, Associate Lecturer and PhD Candidate with QUT’s Faculty of Business and Law. “Restructuring, despite its slow start, has continued to gain traction, now outpacing VA appointments,” says Bull, who is dedicated to advancing SME rescue regimes. “The [data] indicates that QLD had a greater number of restructuring appointments than its larger Victorian counterpart. Victoria appears to have a greater number of Voluntary Administration appointments, but those VA appointment numbers are not being converted into Deeds of Company Arrangement. These figures are interesting because cafes, bars and other businesses in the hospitality industry make up a large proporition of Australian SMEs, and the café culture in Victoria is one of the State’s many drawcards. Those Victorian businesses are presumably suffering from the same levels of financial distress as other hospitality SMEs around Australia and would benefit from access to the SBR regime.”

First half a harbinger of full-year insolvencies?

The first-half FY25 figures outlined in the Corporate Insolvency Index highlight the challenges faced by Aussie businesses: in total there were 10,268 appointments recorded, reflecting a 53% increase year-on-year compared to the previous corresponding period. “This surge reflects the ongoing impact of tightened credit conditions and economic pressures, particularly on smaller businesses,” says Gammon. “That’s in addition to the ATO’s singular focus on recovering accrued tax debt.”

Adds Bull, “Except for Tasmania and the NT, the number of formal insolvency appointments has increased between FY22 and FY24, possibly reflecting the delayed financial impact of the Covid pandemic and the government financial support provided. If this trajectory continues then FY25 is likely to see even higher numbers of formal insolvency appointments.”

Covid no longer an accepted excuse

Commenting on the outlook for the rest the financial and calendar years, Archer warns “there’s no hiding this year”. “Covid and difficult trading conditions are no longer being accepted by the ATO and other creditors for unpaid debts and insolvent trading,” he says. “The very high level of unpaid ATO debt means a lot of businesses are trading that can’t pay their debts as they fall due. This means they can’t pay the debts they’re incurring every day, which is trading while insolvency. The ATO very clearly intends to stop this happening.”

Andersen says that “The economic environment continues to pose challenges for Australian businesses. Persistent inflation, high interest rates, reduced consumer spending, and increased supply chain costs have some businesses struggling to balance cash flow. The pressure is particularly pronounced for businesses that took on pandemic-era debt.”

Insolvency spike in Victoria

According to the Corporate Insolvency Index, comparison figures reveal sharp increases in insolvency appointments across the board. Victoria stands out with a remarkable 77% growth in insolvencies compared to H1 FY24, largely driven by increased restructuring engagements. South Australia experienced the most dramatic growth with a 90% rise; while Tasmania recorded a 127% surge, reflecting heightened insolvency activity from a smaller base. Meanwhile, NSW and Queensland, while maintaining the largest appointment volumes at 3,800 and 1,878 respectively, showed strong growth of 36% and 59%, indicating continued pressures in these key economic hubs.

“One surprise is the resilience of businesses in certain regional areas, which continue to fare slightly better than their metropolitan counterparts,” says Andersen. “However, data also shows that industries such as construction and hospitality remain impacted, reflecting their vulnerability to rising costs and shifting consumer behaviour.”

Insolvency Australia’s H1 FY25 Corporate Insolvency Index, which is sponsored by G&H Financial, details:

  • Appointment Volume by State & Territory
  • Top Firms by Appointment Volume (nationwide and by state / territory)
  • Top Liquidators by Appointment Volume (nationwide and by state / territory)
  • Comparison of Q2 volumes
  • Comparison of H1 volumes

To register for the report, go to: Corporate Insolvency Appointment Reports – Insolvency Australia

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