The numbers of personal insolvencies in 2025-2026 (13,465) have increased from those in 2024-25 (12,257) but they still remain low, compared with the 32,000 of 10 years ago.
According to AFSA, three trends have driven the fall in personal insolvencies in recent times, changed creditor behaviour following the Hayne Royal Commission, changed debtor behaviour during and following the COVID-19 pandemic, and low unemployment.
Small businesses
“Business bankruptcies” continue to remain significant. Over 45% of bankruptcies in the April-June 2026 quarter had some connection with a business, whether conducted as a sole trader or partnership, or through a company.
In the case of small corporates, personal and corporate assets and liabilities are invariably intertwined, including through personal guarantees. As AFSA’s submission to the PC says that
“small business financial distress often involves interconnected personal and business liabilities, creating a need for coordination across insolvency frameworks and processes. … financial distress – particularly for small businesses and closely held companies – often spans both systems. This can increase complexity, duplication and administrative burden for debtors, creditors and practitioners”.
The World Bank reports on small business debts and personal debts often being “intermingled”, across all comparable jurisdictions, such that if the insolvent debtor cannot access a streamlined procedure and debt discharge, “it can lead to a chilling effect on entrepreneurial activity”: The Economic Impact of Insolvency Regimes, Menezes and Gropper, 2025.
The Productivity Commission now has for consideration whether there are net benefits of greater harmonisation for small business owners who may need to navigate both corporate and personal systems simultaneously.
Independence
One issue is independence. Its requirements restrict one practitioner from managing both an individual’s personal and corporate insolvency appointments, even if the practitioner holds dual registrations as both a trustee and a liquidator). Debtors often have to provide very similar information and context to 2 different practitioners. There is the risk that the debtor may (knowingly or unknowingly) provide differing information to the two practitioners; likewise the practitioners themselves.
Double laws rules and regulations
As AFSA also explains, creditors involved in both processes will need to navigate differing obligations and provisions as to meetings, claims, review rights, antecedent transaction provisions etc and potentially also across jurisdictions. Practitioners pass on these regulatory costs to debtors and creditors through their charging models.
These frictions also impact practitioners directly. According to AFSA, Australia’s duplicative regulatory system imposes a “burden” on practitioners who operate in both the corporate and personal insolvency space – about 83% of trustees are also liquidators – with the need for separate registrations, fees and levies and statutory and regulatory reporting requirements.
In the context of examining barriers, these are the equivalent of the different parochial state licensing laws.
The individual
And none of this addresses the next problem, that while a person as a director of a failed or restructured company need suffer no restriction, if they become bankrupt they will effectively be restricted in their dealings for at least 3 years – what might be called a real barrier to business dynamism. This was acknowledged by the PJC Report: [8.39]. The Productivity Commission’s recommendation in 2015 that the period be reduced to 1 year was ignored.
Data needed
But more data is needed to identify the extent of these barriers. AFSA says that it and ASIC are “strengthening data-sharing arrangements to better identify links between personal and corporate insolvency”. In 2010, a recommendation to gather joint personal and corporate insolvency data was rejected.
Will the government at least ignore any recommendations?
Whether the government rejects any Productivity Commission recommendations, or at least ignores them, is problematic. There was no action taken on the personal insolvency recommendation in the 2015 PC Report.
In March 2023, the Commission’s 2015 recommendation was deferred to “be considered in any future policy analysis …”: https://treasury.gov.au/publication/p2023-687544.
If the government, or is it the industry? can’t handle that limited reform, what comes from the PC may be well beyond their limited perspective.
One Response
It is pointless having inquiries and indicating acceptance in partner in whole for government to act. It is not in the public interest and usually results in another expensive frustrating inquiry