Rise in businesses going insolvent in past month in South Australia as rate hike looms

Business failures in SA have risen for a second month as another rate hike looms – ahead of a crucial holiday slowdown for many businesses. See the list.

Construction has been among the hardest hit industries in recent months. Picture: NCA NewsWire / Martin Ollman

Business insolvencies are continuing to rise in South Australia as another interest rate hike looms, and ahead of a critical holiday slowdown period that could make or break businesses on the edge.

According to statistics from the Australian Securities and Investments Commission, 34 South Australian companies fell into administration or liquidation in October, up from 26 in September and 22 in August.

The latest list includes boutique building company Residence Building Group, which went into voluntary administration in October with a multimillion-dollar debt pile.

It followed several other builders who have hit the wall this year, including Qattro, Felmeri Group and 7 Star Constructions.

Oracle Insolvency Services managing partner Nick Cooper said a more aggressive approach from the Australian Taxation Office in its debt collection activities was a major factor behind the rising number of insolvencies, which was also leading to an uptick in personal insolvency agreements and bankruptcies.

He said the coming weeks could be crucial for many vulnerable businesses.

“Often there can be a bit of a flurry of insolvencies just before Christmas,” he said.

“Depending on the nature of their business, a lot of businesses close down obviously after Christmas and for most of January, but they’ve still got their payroll obligations to pay.

“So if they’re running short on cash now that’s not a good sign, because they’ll need to find the cash to pay wages through the closure over Christmas, often without any income at all.”

Nationally, the number of companies that collapsed in October soared to 569, almost 43 per cent more than the 399 reported in October last year.

Residence Building Group’s Dave Menner. Picture: James Elsby

NSW recorded 237 company collapses, up almost 22 per cent on the 195 recorded 12 months previously, while Victoria had 138 – an increase of 79 per cent.

There were 85 in Queensland, Western Australia recorded 54, the ACT 10, and Northern Territory four.

Economists are pencilling in another interest rate hike when the Reserve Bank meets on Tuesday, with the cash rate expected to rise by 25 basis points to 4.35 per cent – its highest level since November 2011.

WCT Advisory managing partner Andrew Weatherley said another hike would continue to affect consumer confidence and spending levels, and increase the pressure on industries such as retail and food services.

“I would also expect increased rates makes it more difficult for borrowers to purchase property, including land, and obtain finance for building, putting more strain on the already challenging construction industry,” Mr Weatherley said.

Last week Insolvency Australia launched a new insolvency helpline to connect businesses and individuals in financial distress with insolvency specialists.

The service offers access to a panel of insolvency specialists for a free 15-minute consultation.

Insolvency Australia chief executive Gareth Gammon said it would act as “an important lifeline” for many business owners.

“Australia’s insolvency numbers recently reached their highest levels this year, and the cost-of-living crisis is putting pressure on businesses and individuals alike,” he said.

“More and more people are finding themselves in financial distress, but many might not know who to turn to. It’s why we have put together this independent team of highly qualified business and personal insolvency specialists to help navigate the process.”