SMEs suffer highest corporate insolvencies

The Australian Securities and Investments Commission (ASIC) has published a report containing the latest statistics on Australian corporate insolvencies for the 2022/23 financial year.

The corporate regulator said its report highlighted the ongoing impact of the COVID-19 pandemic on small businesses, with small to medium size corporate insolvencies topping external administrators’ reports.

Of all the reports lodged between 1 July 2022 and 30 June 2023, 83 per cent had assets of $100,000 or less, 82 per cent had less than 20 employees, 32 per cent had liabilities of less than $250,000 and 68 per cent had liabilities of less than $1 million.

The data published by ASIC also correlates to a recently-released report from the Australian Financial Security Authority (ASFA) on personal insolvency, which found the highest number of personal insolvencies were recorded by people who worked in construction, retail and transport.

Corporate insolvencies in construction accounted for 28 per cent, which was followed by those in the accommodation and food services industry at 15 per cent.

The data showed the most common reported failures leading to insolvency were inadequate cash flow or high cash use (52 per cent), followed by ‘other’ (50 per cent) and trading losses (49 per cent). Deeper investigation of the ‘other’ causes found 19 per cent of reports indicated the COVID-19 pandemic as a contributing factor.

New South Wales saw the highest number of insolvencies reported at 41 per cent, followed by Victoria (27 per cent) and Queensland (18 per cent).