Huge increase in number of Victorian businesses collapsing, highest rate in Australia
Victoria has recorded the largest increase in business insolvencies in Australia, with a 71 per cent rise compared to a year ago.
Victoria
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Victorian businesses are collapsing at an alarming rate due to cost of living pressures, elevated operating expenses and an aggressive crackdown on unpaid debt by the ATO.
A 71 per cent increase in insolvency appointment has been recorded in the six months to December 31, with 2181 business failures logged compared to 1275 during the same period a year ago.
Corporate failures have been driven by the embattled hospitality sector, which has seen a sharp increase from this time last year — while construction firms continue to play an outsized role.
It comes as data from the Australian Securities & Investments Commission showed there were 7483 insolvency appointments nationally in the December half, a 47.1 per cent increase on the 5088 appointments a year earlier.
Industry has warned that last year’s record high of 11,053 was expected to be smashed over coming months, with insolvency appointments forecasted to reach up to 16,000 this fiscal year even if the Reserve Bank moved to cut interest rates.
The past financial year had a record 11,053 insolvencies, surpassing the previous high set in 2012 during the Global Financial Crisis. There were 3.47 million registered businesses at the end of 2024 compared to 3.23 million in 2023.
Business Reset restructuring practitioner Jarvis Archer said insolvency numbers could reach as high as 16,000 as small businesses face a challenging climate.
“Compared to pre-Covid levels the current year is 84 per cent higher,” he said to The Australian.
“Based on this trend, total insolvencies for the 2025 financial year could reach as high as 16,000, far exceeding last year’s record and almost double the pre-pandemic average of around 8,000 per year.”
Victoria’s rise dwarfed that of the other states, with Queensland insolvency appointments up 51.4 per cent and NSW, which makes up the lion share of appointments overall fared better with a 30 per cent jump to 2906.
South Australia saw a 76 per cent increase to 319 over the same period from a low base of 181.
An onslaught of cost pressures from higher wages, energy bills food inflation and continued increases in alcohol excises, coupled with penny pinching consumers have slammed hospitality businesses with many closing doors across the country.
Figures from ASIC show insolvencies in the sector have increased by 70.2 per cent to 1312 compared to 771 in the same period a year ago, while other services soared 70.1 per cent to 808 and retail trade rose 14.2 per cent.
Australian Hotels Association chief executive Stephen Ferguson said hospitality venues are being squeezed at both ends from rising operating costs including insurance, food and drink, as well as the inability to pass that on to consumers which has hurt margins.
“There’s only so much you put the price of a schnitzel up as people will stay at home and cook one themselves. It’s a challenging balance between providing something that is affordable and also will allow you to pay the bills,” he said
“Businesses are being hammered by the cost of operating a venue despite revenue doing okay. It is all those input costs that add up such as food, beverages, excise, energy and insurance. All this pressure is making it harder for many to survive.”
Construction collapses, which make the largest overall sector for insolvency appointments, continued to slow to be up by 29.6 per cent in the six months to December compared to 38.6 per cent in the same period between 2022 and 2023.
Melbourne-based apartment builder Bensons Property Group collapsed after Christmas, threatening to derail a development pipeline of more than 1300 homes across $1.5bn of property projects including its crown jewel, the $500m Chevron One Residences on the Gold Coast.
In August, Victorian-based Tango Caravans had plunged into liquidation after it owed $3.2m to 85 creditors, leaving 60 customers as much as $90,000 out of pocket.
The owner of Melbourne’s Lobster Cave avoided having a liquidator appointed to his famed restaurant although new corporate filings show his debt woes have blown out to as much as $17m.
The Australian Taxation Office’s aggressive pursuit of small business debts has also been a driving force behind a rise in insolvency as it looked to reduce its $35bn small business debt book by clamping down on businesses unable to pay back their debt after relaxation of laws during the pandemic.
Mr Archer said there was no sign that the ATO would slow down on issuing director penalty notices over unpaid tax with strong volumes seen in the run up to Christmas.
“Compounding the debt challenges is the ATO’s harder stance on remitting interest and penalties accrued on tax debts. While interest remission was straightforward until early 2024, the ATO now defaults to denying requests, even in cases with extenuating circumstances,” he said.
“With interest rate cuts only forecast from mid-2025, it may only be later this year before we see the numbers level out.”
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