Business failures continue to propel personal insolvency chain reaction
'Trumponomics' could trigger further bankruptcies, says insolvency solutions firm
Business-related personal insolvencies are on the rise, the latest quarterly figures from AFSA show. And geopolitical uncertainty – particularly 'Trumponomics' – could trigger greater numbers in 2025, warns insolvency and business turnaround specialist Jirsch Sutherland.
According to the September quarter 2024 New Personal Insolvencies from AFSA, over a quarter (27.9%) were business related, compared to 25.2% for the same period in 2023. "However, the level of personal insolvencies is still well below historical averages," says Jirsch Sutherland Partner Chris Baskerville, a dually registered bankruptcy trustee and liquidator. "Prior to key events including the GFC and the Hayne Royal Commission, personal insolvencies were running at around 25,000-30,000 a year but since Covid they have dropped to around 10,000 a year, which is borne out by AFSA's 10-year time series. Regardless, we'll likely continue to see an uptick as micro and macroeconomic factors continue to play out."
Two other Jirsch Sutherland Partners (also dual bankruptcy trustees and registered liquidators) provide their viewpoints:
Stewart Free (NSW based Partner)
- The Trump administration may have a real impact on financial markets, and there's already uncertainty bubbling. Tariffs will mean many products will be even more expensive in the US, which will likely drive inflation, which could flow onto Australian consumers and businesses and ultimately impact directors.
- The greatest stressors currently are cost-of-living, Director Penalty Notices, personal guarantee debts from business failures, and the inability to defend defensible actions because of lack of money to pay lawyers.
- We'll likely see more personal insolvencies as a flow on from the level of business insolvencies we're currently witnessing.
- The upcoming financial hangover from Christmas and mortgage stress will continue to drive bankruptcies.
Malcolm Howell (Victorian based Partner)
- Howell says other current stressors include the increase in the cost of supplies and labour, and the inability to find staff.
- A normal part of the cycle is for personal insolvencies to follow corporate collapse, and I believe both will continue to rise in 2025.
- In Victoria, Land Tax will drive an increase in bankruptcies early in the new (calendar) year as business owners and individuals receive large 2024 land tax bills they are unable to pay. With the drop in prices and flood of properties on the market, some people may have over-committed themselves and we'll see the impact being felt in coming months.
- "While the Victorian economy may be different to other states and territories, one thing remains the same: people need to position themselves for a period of low growth and higher taxes – and whether it's a director or individual, seek help immediately if you're in financial distress," Howell says.
According to the latest AFSA figures, personal insolvencies rose in all states and territories compared to the September quarter 2023, except for SA and the ACT, where the number declined. The figures were highest in NSW (1,038), with 826 in QLD, 635 in VIC, 276 in WA, 169 in SA, 86 in TAS, 31 in the ACT and 26 in the NT.
Summary of national new personal insolvencies figures for September quarter 2024:
- 1,808 were bankruptcies
- 1,428 were debt agreements
- 31 were personal insolvency agreements
- 8 were insolvent deceased estates
- 924 personal insolvencies were business-related, up from 782 in the September quarter 2023.
Source: AFSA
