Personal insolvencies increased in July 2024, to 1157 compared with the lows of 851 in June 2024, and 929 in July 2023, according to new provisional monthly statistics released by the Australian Financial Security Authority (AFSA).
That’s about .0064% of the adult population.
The government’s proposed law reforms include to allow debtors to have 7 extra days to respond to a bankruptcy notice and to have their bankruptcy expunged from the public record after at least 10 years.
Small businesses
During that period, 315 people (27%) who entered a formal personal insolvency were also involved in a business, rising from 223 (26%) in June 2024. Among those who went bankrupt, over 43% were also involved in a business. Where AFSA could identify the industry in which an individual worked, the most common industries were construction, health care and social assistance and transport, postal and warehousing.
AFSA says that annual personal insolvency volumes are expected to rise to around 14,750 in 2024–25 (say 1,230 per month) which, while this would be an increase on current levels, would still be below the long-term average of 23,100 (1,925 per month), and the 37,000 around the time of the GFC.[1]
Reforms
Small business comprises by far the majority of business enterprises. Of those, around 60% are sole traders, and 28% employ 1-4 people: Small Business Matters_February 2024.pdf (asbfeo.gov.au).
Small business insolvency reforms include:
- for small companies, to allow their ‘restructure’ up to $1m in debt, often to the ATO, under Part 5.3B, and thereby allow the director’s business to continue; and
- for individuals, as proposed, to be protected from involuntary bankruptcy for debts under $20,000, to have 7 extra days to respond to a bankruptcy notice, and to have their bankruptcy expunged from the public record after at least 10 years have expired.[2]
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[1] State of the Personal Insolvency System Report | Australian Financial Security Authority (afsa.gov.au)
[2] Bankruptcy law reforms | Our ministers – Attorney-General’s portfolio (ag.gov.au)
