Tsunami of failures with more on way
A MASSIVE wave of more than 5500 Australian companies hit the wall over the past year as many business owners succumbed to “sheer exhaustion”.
The number of companies going into administration or liquidation topped 5560, according to Australian Securities and Investments Commission data.
NSW accounted for about 40 per cent with 2177 companies going bust over the past 12 months. Victoria had 1236 insolvencies, followed by Queensland with 970, 432 in West Australia and 225 in South Australia.
Revive Financial director Jarvis Archer said the Australian Taxation Office’s return to recovering tax debts after a two-year hiatus drove a lot of the increase in insolvencies.
“Director warning letters and director penalty notices triggered company directors to deal with their hefty tax debts that accrued during the pandemic,” he said. “What we’re seeing from struggling business owners at the moment is their sheer exhaustion.
“Often they’ve battled through the last two difficult years just to end up in trading conditions even more hostile than the ones they’ve survived.”
Mr Archer said that as well as the ATO, landlords had become less patient with businesses trying to recover from pandemic lockdowns and other government restrictions.
WCT Advisory managing partner Andrew Weatherley said the greatest number of insolvency appointments was in the construction industry, followed by accommodation and food services, retail and professional services. One of the biggest collapses of the year was construction giant Probuild. In late February, administrators were called after its South African parent said it would stop financially supporting the group.
Mr Weatherley said the collapse of several cryptocurrency platforms also had caught a significant number of people by surprise. “The value of crypto currencies themselves have been falling for several months and are volatile in general,” Mr Weatherley said.
“I think part of the problem seems to be how those entities have been operated and the steamroll effect on confidence in the industry.”
Last month crypto currency exchanges TrigonX and Digital Surge called in administrators after global giant FTX went bust. Mr Weatherley said he expected a steady increase in insolvency appointments in 2023 due to higher interest rates, inflation and energy prices. Supply-chain issues, staff shortages and wage growth also would have an impact.
Mr Archer predicted more pain for the troubled construction sector in the coming year. Construction-related companies still represent one in four company insolvencies, compared to one in five before Covid. “There’s still a lot of stress in this space, which is expected to crystallise in increased insolvencies in early 2023,” he said.
“The current state of the construction industry has been characterised by some as a house of cards. The two key factors that are expected to play havoc for the industry in coming months are cashflow and licensing.” He said while builders had started to pass on the price increases to clients, delays were still drawing out build times, and labour pricing was through the roof.
What we’re seeing from struggling business owners at the moment is their sheer exhaustion Jarvis Archer