There was a total of 9,930 personal insolvencies in Australia in the 2022–23 financial year – around 4% higher than the 2021–22 annual figure of 9,545.
According to AFSA, “this marginal national increase is in line with forecasts, as we expect to see personal insolvencies revert towards the 10-year average in the next 2 years.” Personal insolvencies up in June quarter 2023 | Australian Financial Security Authority (afsa.gov.au)
In February 2023, AFSA predicted that personal insolvencies would rise towards pre-COVID levels over the next two years. The 10 year average of personal insolvencies is 25,300 annually: AFSA forecasts personal insolvency numbers to rise | Australian Financial Security Authority.
But that figure must be compared with the 35,000++ personal insolvencies in 2010.
We all just hope these predicted numbers do not eventuate.
My earlier comments about these numbers appear following.
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Low personal insolvency numbers – a need for a rethink? 31 July 2023
The fact that personal insolvency numbers fell in June 2023, compared with the month before, is not that significant either way given the ups and downs of the figures over the last year or two. What is significant is that they remain well below predictions that numbers will reach pre-Covid levels. These and other figures suggest a need for a rethink of what the bankruptcy system is all about.
June 2023
During June 2023, there were 901 new formal personal insolvencies – falling from a high 1,031 in May, and a slight increase on June 2022 of 852. Of the 901, there were 501 bankruptcies, 451 by debtor’s petition and 50 by sequestration order, a fairly usual 90:10 proportion.
Construction, retail and accommodation and food services continued as the main industry contributors to personal insolvency figures, with nearly 40% of insolvencies being business related.
2022-2023
Total personal insolvencies for 2022-2023 were just over 9,900,[1] far short of AFSA’s economic prediction [2] that during 2023-2024, numbers are expected to revert towards the pre-Covid 10-year average of 25,300 per year. Time will tell.
The estate details
As to the nature of these individual insolvencies, during 2021-2022:
- Over 52% of personal insolvencies involved less than $50,000 in liabilities, with a quarter having debts totaling over $100,000
- The personal bankruptcies last for at least 3 years
- Over 23% of active personal insolvencies were business-related; however, these insolvencies contributed nearly two thirds of the total system debt – $11.4 billion. That is, the average debt for a business-related personal insolvency was $830,502 – over 5.8 times larger than a non-business-related personal insolvency of $141,733. And business- related personal insolvencies are currently at around 40%.
- The main creditors by far are the Australian Taxation Office and the big four banks which were collectively owed $3.7 billion in business-related personal insolvencies and $2.4 billion in non-business-related personal insolvencies.
- In 2021–22, 9 practitioners (including the Official Trustee) were responsible for administering 80% of all active personal insolvencies.
- Average dividend returns in 2021-2022 were 2.23c/$.
For a pre-Covid snapshot, in 2018–19, of the $230.35 million distributed by registered trustees, 32.2% was paid in dividends to creditors while 40% was paid in trustee remuneration. The remaining 27.8% was for trading payments, costs in administering estates, bank fees and charges, and government realisation charges and interest charges. Nevertheless, over 30% of estates administered by registered trustees provided no remuneration, let alone any dividend for creditors.[3]
More detailed statistics for 2022-2023 from AFSA should be available in due course, showing value of assets realised, dividend returns, government charges, trustee remuneration and more.
Review
If the government accepts the recommendation of the PJC Report on corporate insolvency to hold a comprehensive review of the insolvency system generally, AFSA’s statistics provide the start of what is needed to review the efficiency and effectiveness of the personal insolvency system.
Alternatively, or as well, these figures could be fed into some AI program, along with some settled aims of insolvency law, to produce a systems review of the structure, pathways and processes with a view to streamlining and reshaping the system.
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[1] Calculated from AFSA’s monthly figures.
[2] STATE OF THE PERSONAL INSOLVENCY SYSTEM (afsa.gov.au)
[3] “In 2018-19, 31% of bankruptcies finalised in that year produced no remuneration in any year of the administration”: Registered trustee remuneration in the personal insolvency system – Best practice report 2020, p 8
