Thousands of Australian companies on the brink of going into administration as EOFY nears
Along with high inflation and weak consumer spending, there’s another key factor pushing a record number of businesses to the edge
Along with high inflation and weak consumer spending, there’s another key factor pushing a record number of businesses to the edge
More than 10,000 companies are expected to have entered external administration by the end of the 2024 financial year, a level not seen for more than a decade. Data just released by the Australian Securities & Investments Commission (ASIC) shows 1,245 companies became insolvent in May, the highest monthly number this financial year. At present, a total of 9,988 businesses have gone bust in FY24 with data from June yet to be finalised.
Deloitte Access Economics Partner David Rumbens said the surge in business insolvencies this year was a “clear sign of economic distress”.
He commented: “[ASIC] predicts that by the end of the financial year, the number of companies entering external administration will likely exceed 10,000 – a level not seen since 2012-13, in the aftermath of the Global Financial Crisis (GFC).”
Mr Rumbens said the elements contributing to this year’s surge in insolvencies include high inflation and interest rates, weak consumer spending, and the commencement of more proactive tax debt collection activities by the Australian Taxation Office (ATO).
“One of the key factors contributing to this surge in insolvencies is the [ATO] pursuing debts that were previously put on hold during the COVID-19 pandemic,” he said.
Mr Rumbens cited ATO figures showing collectable debt rose 89 percent in the four years to June 2023. This has particularly impacted small businesses, which account for approximately 65 percent of the total debt owed at about $33 billion. “But more strictly enforced debt collection is coming at a time of tough economic conditions. High interest rates and cost-of-living pressures have weakened consumer spending, particularly in more discretionary components of spending.”
The construction sector has seen the highest number of insolvencies by far in FY24, mirroring the trend of FY23. Of the 9,988 insolvencies to date, 2,711 of them are in the building sector, which faces several challenges. These include a substantial lift in the cost of construction materials that is well above inflation and has made many fixed-price contracts signed within the past few years unprofitable. There is also a significant labour shortage that is delaying new home completions and new project starts, and also adding higher costs to projects.
“The construction sector has been hit particularly hard, with construction firms leading industry insolvencies in every quarter since mid-2021,” Mr Rumbens said. “They have accounted for approximately 25 percent of all insolvencies during this period. The residential construction sector is already facing a backlog of projects to complete as a result of skills and material shortages in recent years, and increased insolvencies in the sector may only exacerbate the problem of housing shortages.”
The ASIC data shows the next biggest industry affected is ‘other services’, which includes a broad range of personal care services such as hair, beauty, dietary, and death care services. The sector has seen 939 insolvencies in FY24. Retail trade is next with 687 insolvencies, followed by professional, scientific and technical services with 585 insolvencies.
“The food & accommodation sector has also experienced a wave of insolvencies. High input costs, worker shortages, and weak consumer sentiment have put pressure on businesses. Specifically, in March, cafés, restaurants, and takeaway businesses accounted for 5.5 percent of total business insolvencies, the highest proportion in the last three years.”
Mr Rumbens pointed out that while the number of insolvencies was high, it represents a lower share of the business sector at 0.33 percent than it did in FY13 when it was 0.53 percent. “This reflects the increase of registered companies in Australia, which has risen from just over two million to 3.3 million since 2012-13. Even so, the continued lift in insolvencies since 2021 highlights the difficult conditions many businesses face at present.”
This stylish family home combines a classic palette and finishes with a flexible floorplan
Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.
An equine retreat in the Byron Bay hinterland has recently resurfaced with a substantial price amendment, amounting to as much as a $4 million discount.
After initially listing for $14 million late last year, Yverlyn Farm is now on the market with price expectations between $10 and $12 million through Deborah Cullen and Richard Royle of Forbes Global Properties.
Tucked away in Brooklet, near Olivia Newton John’s former Gaia retreat and 22kms from the famous shores of Byron Bay, the 14ha estate blends the best of the region’s remote natural beauty with world class equestrian facilities and unobstructed views of the majestic Nightcap Ranges and Minyon Falls.
Owned by boutique renovation expert Rose Deo, co-founder of game design company Halfback Productions the company behind Fruit Ninja, Yverlyn Farm was once a working wholesale nursery. Today the luxury estate has been transformed into one of Byron Bay’s most desirable equestrian estates, home to a modern four-bedroom residence, additional guest accomodation, contemporary stables, an Olympic arena, several paddocks, and expansive grounds.
In the main house the spacious layout incorporates multiple living spaces framed by a choice of outdoor areas from the wraparound veranda to the alfresco dining area.
At the heart of the single-storey footprint, a grand dining room features a cosy sandstone combustion fireplace and an adjoining shaker-style kitchen features an imported Lacanche range cooker, bespoke cabinetry, and deVol aged brass tapware. There is also a butler’s pantry and laundry with external side access.
All four bedrooms have built-in wardrobes and big windows showcasing the picturesque natural surrounds. From the primary suite there are panoramic views of the hinterland, a large walk-in wardrobe and grand ensuite with freestanding bathtub.
When it comes to outdoor features there is a fully tiled and heated mineral pool, a majestic tree-lined driveway, a French limestone fountain, an orchard, parterre garden, and established vegetable patch. The property’s rich history is also evident in its original drystone fences, a legacy of the Irish settlers who built them in the late 1800s.
For the equestrian enthusiast, Yverlyn Farm includes a professionally designed stable block with six air-conditioned stalls, covered day yards, a tack room and wash bay. A full-sized Olympic arena comes complete with LED lighting and an irrigated European surface.
Above the stable block, a fully self-contained guest suite has two bedrooms with ensuites.
Additional accommodation includes the original dairy which has been transformed into a studio or office space with a slow-combustion wood fireplace, kitchenette and bathroom.
Nine paddocks and a dam provide ample space for roaming horses to roam and there is a separate barn plus a machinery shed.
Yverlyn Farm is listed with Deborah Cullen and Richard Royle of Forbes Global Properties with a price guide of $10 to $12 million.
This stylish family home combines a classic palette and finishes with a flexible floorplan
Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.