Victoria’s insolvency rate up 63 per cent so far this financial year

Victoria has recorded the fastest increase in insolvencies among mainland states as the ATO ramps up efforts to recover billions of dollars it’s owed.

Insolvencies have surged 63 per cent in Victoria so far this financial year.

Victoria remains the mainland state with greatest surge in insolvencies over the past eight months as the Australian Taxation Office renews efforts after Christmas to claw back billions owed by small businesses.

According to the latest data from the Australian Securities & Investments Commission across the nation there have been 8789 first appointment insolvencies in the period from July 1, 2024 to February 16, 2025.

Victorias insolvencies hit 2560, a 63 per cent increase on the same time a year ago. By comparison, Queensland up 44 per cent to 1643 and NSW rose 30 per cent to 3395.

Insolvency expert and Business Reset director Jarvis Archer said the reason that Victoria was ahead of NSW and Queensland may be a matter of timing, as it experienced longer lockdowns during the Covid pandemic and was now returning to normality.

“While I couldn’t confirm the ATO has previously been more lenient on recovery of debts in Victoria due to the extent of its lockdowns, it’s reasonable to expect this may have happened,” he said. “Longer lockdowns meant worse financial impact, and longer recovery times.

“However, the ATO has made it clear that leniencies are off the table. As a business owner in 2025, you must pay to play when it comes to your tax.”

The ATO is seeking to recover more than $35bn in debt from small businesses. Mr Archer said the impact of the recovery efforts on business insolvencies would depend on the current trading conditions, which varied between states and industries.

“Trading conditions will determine whether a business has the financial capacity to pay its debts in full over an agreed time frame, if it needs to consider debt reduction options, or otherwise close and liquidate,” he said.

“But looking at historical data, it appears Victoria isn’t doing worse – it’s just catching up.”

Mr Archer said proportionally, Victoria represented 27 per cent of company insolvencies in the 2022 financial year, while NSW represented 39 per cent and Queensland 19 per cent.

Business Reset director Jarvis Archer.

“These proportions are relatively consistent in current numbers with Victoria at 29 per cent, NSW at 39 per cent and Queensland at 19 per cent,” he said.

“However, looking more closely, NSW insolvencies for the 2025 financial year to date are about 1.85 times higher, compared to about 2.1 times higher for both Victoria an Queensland.

“That indicates NSW has fared slightly better than its neighbouring states.”

The impact of the string of lockdown in Victoria can be seen in commercial property agency’s CBRE recent data showing Australia’s CBD occupancy rate hit 71 per cent of pre-Covid levels in the third quarter of 2024, however, Melbourne’s occupancy level was at 59 per cent – the lowest among major Australian capital cities.

That was compounded by the latest Property Council Office Market Report Melbourne’s vacancy level stayed at 18 per cent, while the rate across all the major CBDs was 13.7 per cent.

Mr Archer said the ATO has ramped up its efforts to retrieve money owned by small businesses.

“The ATO has launched into action issuing the first director penalty notices we saw in mid-January,” he said.

“They’ve piled up since then as well as over 100 winding-up applications filed in January, double January 2024, and garnishee notices showing the ATO is not holding back.”

Originally published as Victoria’s insolvency rate up 63 per cent so far this financial year