Queensland insolvencies soared by 25 per cent in October with the ATO ramping up the pressure

Company collapses jumped 25 per cent in Queensland over the past month with the taxman becoming increasingly aggressive as interest rate rises loom. SEE THE FULL LIST

Queensland insolvencies soared by 25 per cent in October with an increasingly aggressive Australian Taxation Office ramping up the pressure as the holiday slowdown period looms for many under pressure businesses already coping with interest rate rises.

Revive Financial head of business, restructuring and insolvency Jarvis Archer said with the July to September quarter Business Activity Statements (BAS) falling in October, many businesses have watched their ATO debt jump.

“For many this has put the prospect of paying their ATO debt beyond reach. Particularly for businesses seasonally quiet over Christmas, like construction, this time of year can stretch cash reserves,” he said.

There were 85 liquidation or administration appointments in Queensland in October, according to preliminary data from the Australian Securities and Investments Commission, collated by The Courier-Mail.

That was 42 per cent more than the 60 recorded in October in 2022 and a 25 per cent jump on the 68 insolvencies in September this year.

Some of businesses that collapsed in October were Electric Bikes Australia which went into administration while Freedom Group Hostels and Schaumkell Access & Scaffolding went into liquidation.

Mr Archer said Queensland insolvencies in 2022-23 were 34 per cent higher than last year. “Construction, hospitality and retail have seen the biggest jumps in failures and our firm has had a recording number of appointments in October,” he said.

“Firms are reporting it’s very difficult to find staff, particularly after three quiet years in bankruptcy limiting new recruits and their development.”

Mr Archer said they were seeing now have ATO debts that have been on payment plans, which they can no longer afford.

“The ATO’s been very vocal about its ‘gloves off’ approach to recovering small business tax debts. They’re seeking full payment, tightening payment plans and more likely to reject interest remissions,” he said.

“These higher demands can cause businesses to run down cash reserves to dangerous levels. Trying to keep up with payments of $2000 to $3000 per week is unrealistic for many small businesses.

“Unless trading at a strong profit to replenish these payments, it’s a ticking time bomb until a business can’t pay rent, wages or suppliers.”

Revive Financial Partner Jarvis Archer.

WCT Advisory managing partner Andrew Weatherley said construction followed by food services remain the industries with the highest numbers of appointments, which was still to be expected given the challenges those industries still face.

“Another interest rise will continue to impact consumer confidence and spending levels and increase the pressure on the industries, like retail and food services,” he said.

“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 the last two engagements for WCT Advisory were in the food industry and both businesses ceased to trade given the diminished position they were in.

“We are seeing pressure applied by the ATO in terms of DPNs (Director Penalty Notices) being issued with the last few engagements have been a direct result of that step,” he said.

“At this stage, while I have heard it talked about, I am not aware of any engagements resulting from an ATO liability being listed with credit agencies.

“Unless a company is seeking finance or opening new trade accounts, I don’t see that being a big driver for insolvency numbers at this stage.