Queensland on the `edge of insolvency cliff’ as pressure ramps up on business

Insolvencies edged lower in April but experts believe Queensland is on the `insolvency cliff’ as the ATO aggressively pursues debts.

Insolvencies forecast to rise further.

Queensland is standing on the edge of an insolvency cliff with company collapses set to trend higher as the year progresses.

Revive Financial head of restructuring and insolvency Jarvis Archer said there was a wave of businesses seeking help in the wake of 10 consecutive interest rate rises with the period from April to September the worst.

“It seems that we’re standing on the edge of the insolvency cliff. Accountants are saying the ATO is aggressively pursuing debts,” he said.

“Where business owners have inquired about restructuring and insolvency, but not acted, there’s now a heightened sense of urgency. They’re really worried about the pressure building on them and looking for relief to their situation.”

According to the Australian Securities and Investments Commission there were 72 administrations and liquidations in April in Queensland, down 31 per cent from 104 from March and off 14 per cent from 84 in April last year.

While the construction sector took the lion’s share of insolvencies the gap was closing with increases in the number of accommodation and food services and retail appointments.

A major casualty in April was the Billykart Restaurant in West End, owned by chef Ben O’Donoghue and Ben Roberts, which has gone into voluntary administration.

Others to go into liquidation were JVR Construction Group from Redcliffe and QLD Cedar Construction.

Mr Archer said retailers were doing it tough with conditions bleak since mid 2022.

“We’re speaking to multiple established retailers that have experienced sales declines of 30 per cent to 40 per cent,” he said

“The feedback is that customers have tightened their belts and aren’t spending, even if products are significantly discounted.

“These discussions are centred around downsizing operations to match the reduced level of sales including vacating leased premises, letting staff go and delaying payments to suppliers where possible.

“One retailer told us “I’ve given up and fight to keep the business alive anymore.”.

Interest rates rising.

WCT Advisory managing partner Andrew Weatherley said overall insolvency numbers were still increasing, with a rising number of food services and retail businesses.

“I think we can expect that trend to continue as they are the industries whereby consumer spending levels and overall confidence impacts the most and they are where, particularly in small business, a lack of capital or funding options can limit options,” he said.

“If interest rates continue to increase after the recent pause, I think that will also push insolvencies in those sectors higher for the rest of the calendar year.”