Insolvencies surge above 11k for FY2023–24
Total insolvencies for the 2024 income year were almost 40 per cent higher than the previous financial year, the latest ASIC data has revealed.
A total of 11,049 companies entered external administration or had a controller appointed during the 2023–24 financial year, according to ASIC insolvency statistics at 30 June.
This represents a 39 per cent increase from the 7,942 companies that entered insolvency in the previous 2022–23 financial year.
In the June quarter alone, there were a total of 3,301 insolvencies, a 38 per cent increase from the same period last year.
The construction sector again recorded the highest number of insolvencies with a total of 2,975 companies entering insolvency, an increase of 34 per cent.
This was followed by accommodation and food services at 1,667 and other services at 1,039.
Speaking to Accounting Times earlier this month, Hall Chadwick partner and insolvency practitioner John Vouris said it was one of the busiest periods he had seen in his 50-year career.
Vouris said increased cost of living and inflation and a more intense focus on debt collection by the ATO and creditors is currently driving an influx in business for insolvency practitioners.
The rise in insolvencies coincides with a significant increase in director penalty notices (DPNs) issued by the ATO.
Recent ATO data provided to the sister title Accountants Daily indicates that 26,702 DPNs were worth a total of $4.4 billion in the 2023–24 income year.
CreditorWatch chief economist Anneke Thompson said CreditorWatch’s latest Business Risk Index for June points to slowing business conditions over the next 12 months.
“Inventories are being run down, and the average value of invoices held by businesses has fallen 49.9 per cent over the year to June 2024,” Thompson said, adding that businesses were now at the toughest point in the monetary policy cycle.
“Monetary policy decisions usually lag what is happening in the broader economy, as data takes time to filter through to the RBA, and the RBA also wants to see a few months’ worth of data to be more certain that their decisions taken at board meetings are the correct ones,” she said.
“While this approach is sound theoretically, in practice it means businesses have to endure high interest rates long after consumer demand has plummeted, and discretionary spending has significantly weakened.”
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