ASIC says administrations and liquidations in Queensland were up 21 per cent in May

Insolvencies in Queensland soared 21 per cent in May with mounting debt and deteriorating economic conditions claiming some major businesses. SEE THE LIST

Company insolvencies continue to climb across Queensland as mounting debt and deteriorating economic conditions start to bite.

According to the Australian Securities and Investments Commission there were 87 administrations and liquidations in May in Queensland, up 21 per cent from 72 in April and up 6 per cent from the 82 notched up in May last year.

Last month award-winning developer Property Solutions Holdings and a string of related companies went into liquidation owing millions.

Founded in 1990, Property Solutions masterminded such successful redevelopments as Centro on James Street in Fortitude Valley and The Barracks on Petrie Terrace in Brisbane before struggling in recent years amid funding problems and the impact of the pandemic on the building industry.

Also, the building industry carnage continued where Civforce Civil Pipelaying being wound up, owing creditors $2.4m after accumulating heavy losses on residential estate projects throughout southeast Queensland.

Separately, Gold Coast-based Obsidian Plumbing has appointed administrators after accumulating debts of more than $500,000 to the Australian Taxation Office.

Revive Financial head of restructuring Jarvis Archer said company insolvencies had continued their 2023 trend at or above pre-pandemic levels.

“It certainly feels busy, and the sense of urgency, even desperation, for company directors is high,” Mr Archer said.

He said liquidations remained high with an increased uptake of small business restructuring engagements for companies with less than $1m in liabilities.

“These suit small businesses that have recovered from the pandemic and are doing okay but need to reduce their ATO and other debts to survive,” Mr Archer said.

“The eligibility criteria for a small business restructure mean that their affairs will be in order, as ATO returns need to be lodged and all super paid.”

Mr Archer said what’s unknown is how many businesses had fallen outside the tax system.

“We’re certainly seeing more companies with significant superannuation and ATO debts,” he said.

“A number of accountants have mentioned they’re helping clients with up to three years of outstanding Business Activity Statements and income tax returns.”

While the construction sector still had the lion’s share of insolvencies.

The ATO had continued ramping up debt recovery efforts since early 2022 and in 2023 has returned to full recovery mode with its activity being described as “aggressive”.

While the construction sector still had the lion’s share of insolvencies there was still strong activity in the accommodation and food services, and retail sectors.

WCT Advisory partner Andrew Weatherley said insolvencies in the hospitality/retail sectors in 2022-23 were well above the previous 12 months in line with a decrease in consumer and overall confidence.

“The withdrawal of government and other support available through Covid and the continued challenging economic environment whereby a shortage or increase in costs for inputs have had a great impact,” he said.

Mr Weatherley there has been an increase in businesses from the food service sector winding up because of a lack of cash flow and the ATO “has certainly become more active”.

In May Mint Snowflake Pty Ltd trading as Ben & Jerry’s Pacific Fair on the Gold Coast and

Vurer Pty Ltd trading as the popular Mexican restaurant Frida Kahlo’s Summer House in Kangaroo Point, Brisbane, collapsed.

Mr Weatherley, who is the Mint Snowflake administrator, said the franchise was a victim of the Covid pandemic.

“They’ve been trading quite well but it’s very hard for some companies to dig themselves out of the liabilities incurred during Covid,” he said.

Mr Weatherley said in line with tough conditions there has been a substantial increase in the use of the small business restructure process (SBR).

He said there were only 70 SBR appointments in 2021-22 whereas in this financial year up to May 14 there have been 350.

“Some increase in that number can be explained by the general increase of total insolvency appointments but we are finding it is often an approach worth exploring and more companies are meeting the requirements particularly around payment of super debts and filing tax lodgements,” he said.