The regular insolvency statistics have been released by ASIC (corporate) and AFSA (personal), but with a current focus on insolvency reform for small business, we are now facing the reality of past and current inaction in have adequate data to direct meaningful reform.
ASIC reports that, of 3,619,913 registered companies, 3,556 companies entered external administration during the first three months of the 2025–26 financial year. This is down 2.1% from the 3,633 companies recorded for the same period in 2024–25.
However, the ratio of companies entering external administration compared to the number registered (0.40%) is up from the prior 12 months but still well below the prior peaks of over 0.50% back in 2011–13.
AFSA statistics show a plateauing or slow fall in numbers during October 2025 (1,116) falling from the 1169 in September 2025 but higher than the 1,009 in October 2024.
AFSA does not show the numbers as proportions of the population but separately reports that the current numbers are well below the pre-COVID-19 average of 28,372 personal insolvencies per year.[1]
“Business related insolvencies”
AFSA also reports on what it calls “business related insolvencies” which it describes as being those of sole traders or partners whose businesses failed or company directors who have given guarantees or incurred other personal liabilities. AFSA reports that 28% of personal insolvencies are business related; however the better percentage is of those in bankruptcy and Part Xs, given that debt agreement thresholds would exclude most people in business.
What we don’t have from these separate sets of statistics is any real body of information concerning small business failures, where there is a connection between personal and corporate liabilities and assets.
This is a problem given that, as the Assistant Minister Dr Andrew Leigh recently acknowledged,[2] there is a blurred division between personal and corporate insolvency in the small business sector that makes navigation of assistance difficult, given the separate regimes for business and personal liabilities.
The Small Business Ombudsman reports that the operations of many small businesses are secured by a mortgage over the family home, and explaining that
“the current insolvency system assumes a neat distinction between a business and an individual, whose distressed financial circumstances do not intersect with one another. Small and family businesses are rarely so neatly arranged”. Rather “we’ve got the oil of an enterprise and the water of an individual. In the space we operate in, virtually everything is salad dressing—it’s a combination”.
Reforms in that area are being considered but it is difficult to do so constructively without good data – for example, as to the extent to which personal guarantees are given for company debts and the extent to which they are enforced, and enforced to bankruptcy.
What is a “business debt” as opposed to a “consumer debt”
A threshold point is that there are difficulties in defining what is a “business debt” as opposed to a “consumer debt”.[3]
O’Brien, Ramsay and Ali refer to what they suggest is a “hidden” population of business debtors among those formally identified as personal debtors.[4] There is a difficulty in drawing sharp distinctions between business and personal bankruptcy and they suggest that given the extent to which these two categories overlap, a regime that applies equally to business and personal debtors is both more practical and more desirable, as a matter of public policy, than a regime that attempts to discriminate between the two.
Given that many small businesses are said to finance themselves with credit cards or such like:
“…a credit card balance can represent a personal vacation or equipment for a business just as a second mortgage can represent cash sunk into home improvements or into a business venture. The line between personal and business debt for an entrepreneur trying to get a small business off the ground may be so blurred that any subsequent effort to segregate the debt is doomed …”.[5]
That is, even the concept of consumer debt is not always sound when the business provides the financial support for the owner and their family.
2010
Fifteen years ago, back in 2010, it was recommended that a joint personal and corporate insolvency statistics unit be established, given the limits placed on quality insolvency reform by the lack of relevant data.[6]
Given the impenetrable divide between the two separate bodies of insolvency, and AFSA and ASIC, that never occurred and has not to this day. We are living with the consequences of knowing little about the intersection of corporate and consumer debt.
Dr Leigh, having referred to the “particular concern” highlighted in the 2023 PJC report about the difficulties in navigating between corporate and personal insolvency in relation to the insolvency of small businesses, will now find that there is little relevant data on that intersection, despite past recommendations.
2025-2026
But even now, in 2025-2026, it should be possible for the two agencies to coordinate useful statistics, in particular given they are both now in the one department.
Recently Dr Leigh spoke of the value of data driven policy and he has spoken of the merits of BLADE, PLIDA and other government databases,[7] access to which is a necessary precondition to well directed law reform. The 2023 PJC report recommended collection of data to support any further comprehensive inquiry and reform. The IMF has warned of “legislating in the dark” in the absence of data.[8]
This is not the usual “we need more data” but rather that AFSA and ASIC coordinate the existing data they produce. Better still, amalgamate their insolvency roles, as also recommended back in 2010.
Insolvency policy is now wholly contained within Treasury, with, presumably, no internal administrative separation between personal and corporate. Treasury’s focus on the need for economic data to direct policy should now provide an opportunity for a coordinated approach to efficiently and productively deal with small business distress.
=======================
[1] State of the Personal Insolvency System 2024-25 | Australian Financial Security Authority
[2] Address to the Australian Financial Security Authority Summit, Sydney | Treasury Ministers
[3] The Myth of the Disappearing Business Bankruptcy, Robert M. Lawless & Elizabeth Warren, (2005) 93 California Law Review 743.
[4] The Hidden Dimension of Business Bankruptcy in Australia, (2018) 46(5) Australian Business Law Review 291-306, Lucie O’Brien, Ian Ramsay and Paul Ali.
[5] Personal Bankruptcy Law, Debt Portfolios, and Entrepreneurship, (2015) 76(20 Journal of Monetary Economics 157-172, Jochen Mankart and Giacomo Rodano.
[6] The Senate Economics References Committee, The regulation, registration and remuneration of insolvency practitioners in Australia: the case for a new framework, September 2010.
[7] Address to ‘Unlocking value: better use of integrated government data for evidence‑based policy’ Policy Roundtable, Academy of the Social Sciences in Australia | Treasury Ministers
[8] Legislating in the dark – continued – IMF Report – Murrays Legal
